Firm Settles Multi-Regulator Charges of AML and SAR Failures

A dually registered broker-dealer/investment adviser and futures-commission merchant settled parallel FinCEN, SEC, CFTC, and FINRA actions arising from deficient AML monitoring and untimely suspicious activity reporting ("SAR").

FinCEN found the firm failed to appropriately monitor more than 61,500 foreign-currency wires aggregating more than $10.5 billion between January 2019 and June 2023. The agency found that the firm continued to rely on a flawed manual reporting system for commodities accounts and had no compensating control for retail brokerage and securities-backed loan accounts, even after a 2018 consent order addressing the same weakness. FinCEN said that the replacement automated system, deployed in early 2021, still omitted a significant portion of the firm's activity due to incomplete data feeds and labeling errors. FinCEN and the SEC also found deficient due diligence for high-risk customers, with FinCEN emphasizing customers tied to Russia and Latin America and negative news linking such customers to corruption, fraud, and money laundering. FINRA made parallel customer due diligence findings.

FinCEN found willful violations of the Bank Secrecy Act's AML program requirement and its SAR requirement. The SEC found a willful violation of Exchange Act Section 17(a) (Records and Reports) and Exchange Act Rule 17a-8 (Financial Recordkeeping) for untimely SAR filings and imposed a censure, a cease-and-desist order, and a $20 million penalty. FINRA found a violation of FINRA Rule 3310 (AML Compliance Program) and fined the firm $20 million. The CFTC found a violation of Rule 166.3 (Supervision) and imposed a cease-and-desist order and an $8 million penalty.

The FinCEN penalty is $125 million, against which FinCEN credits the $48 million paid to the SEC, CFTC, and FINRA; $62 million is payable to the Treasury now and $15 million by May 31, 2028, subject to a waiver up to that amount for qualifying expenses of the required independent AML program review. The firm is also required to complete a third-party lookback to identify and report previously undetected suspicious transactions.