A broker-dealer settled FINRA charges for failing to detect suspicious trading activity, file suspicious activity reports ("SARs"), and implement its own anti-money laundering procedures.
In a Letter of Acceptance, Waiver and Consent ("AWC"), FINRA alleged that the broker-dealer required its employees to have "proof of actual fraud" to file SARs, a standard that is inconsistent with Treasury's requirement that a SAR be filed where there is suspicion of unlawful activity. FINRA found that the broker-dealer also failed to implement its own AML procedures requiring the collection and completion of Deposit Review Forms relating to low-priced securities, leading to missed red flags. Additionally, FINRA stated, the broker-dealer's AML compliance program was inadequate, due in part to its failure to dedicate sufficient resources to the program. According to FINRA, this deficiency resulted in the broker-dealer's AML analysts (i) not using risk-based factors when choosing transactions for review and (ii) only being able to review approximately 20 percent of the chosen transactions, which were not the riskiest transactions at the firm.
The firm was also found to have failed to submit information required by MSRB Rule G-32 and MSRB Rule G-17 in connection with public offerings of municipal securities.
To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $475,000 fine and (iii) comply with the undertakings outlined in the AWC.
Commentary
The regulators have put broker-dealers on notice that they should rev up the SARs filing engine.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
