Online Brokerage Firm Fined for Aml Compliance Failures
Broker-Dealers
AML
April 30, 2024
The Case
FINRA has fined an online brokerage firm $700,000 for anti-money laundering (AML) failures from 2016 to 2022. According to FINRA documents, the broker-dealer failed to reasonably escalate potentially suspicious customer trading activity for further AML review to determine if suspicious activity reports should be filed.
Specifically, the firm did not have adequate procedures for analysts to consistently escalate suspicious trading alerts to the AML department. As a result, certain potentially suspicious activity was not reviewed or reported.
Examples cited include a customer involved in potential pump-and-dump schemes, an institutional customer with significant alerts for wash trades and layering, and a retail customer with alerts for wash trading and marking the close.
Why Does This Matter?
This case serves as a reminder for financial institutions to regularly review and enhance their AML programs. Establishing robust procedures for escalating and reviewing suspicious activity is crucial in maintaining compliance with regulatory standards.
Furthermore, the necessity for comprehensive written supervisory procedures cannot be overstated, particularly in areas such accepting and reselling low-priced securities. Financial institutions should take proactive steps to prevent AML program deficiencies and uphold the highest standards of compliance to avoid regulatory repercussions.
InnReg's Experience
As an established outsourced compliance provider since 2013, InnReg has broad experience in assessing, designing, and enhancing AML programs to enhance compliance and operational efficiency.
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RIAs
The SEC recently brought settled enforcement actions against two registered investment advisers for failing to establish, maintain, and enforce written policies and procedures reasonably designed to prevent the misuse of material nonpublic information (MNPI), in violation of Section 204A of the Investment Advisers Act of 1940 (Advisers Act) and the Compliance Rule.
RIAs
On Sep. 4, 2024, FinCEN published a final rule (Final Rule) adding certain RIAs and ERAs (collectively, Covered Advisers) to the definition of “financial institution” under the regulations implementing the BSA, and imposing on Covered Advisers broad AML and CFT program requirements, as well as other BSA recordkeeping and reporting requirements.
Broker-Dealers
On November 22, the SEC announced (here) that broker-dealers Webull Financial LLC, Lightspeed Financial Services Group LLC, and Paulson Investment Company, LLC agreed to settle charges that they filed with law enforcement SARs that failed to include required information.
