Common AML Compliance Program Deficiencies

As FINRA continues to crack down on broker-dealers with anti-money laundering program related deficiencies, CCOs and AML compliance officers need to take note of the most common AML program red flags being mentioned in recent FINRA enforcement actions. Below is a list of some of the AML-related disciplinary actions recorded by FINRA since January 2017.

Firm Lacks Adequate AML Policies, Procedures and Internal Controls

A clearing and execution services firm has been fined $100,000 and ordered by FINRA to pay these costs for failing to establish and implement AML policies, procedures, and internal controls. The firm is alleged to have violated NASD Conduct Rules 3011(a) and 2110 and FINRA Rules 3310(a) and 2010. The firm committed the violations by relying on an ad hoc, undocumented, manual system of surveillance for potential wash trades and other types of manipulative activities. Due to the high-volume electronic trading environment in which the firm operated, the informal surveillance system was highly inadequate.

Case number: 2009020941801

Firm Violated FINRA Rules 3310(a) and 2010

FINRA has filed a complaint against a California-based clearing firm for violating FINRA Rules 3310(a) and 2010. These rules require FINRA members to develop and implement a written AML program reasonably designed to achieve and monitor compliance with the regulations and requirements represented in the Bank Secrecy Act. Between June and August in 2014, the clearing firm failed to implement AML policies, procedures, and internal controls reasonably expected to detect and cause the reporting of suspicious transactions in accordance with the Bank Secrecy Act. During this time frame, the activity that forced the firm to restrict or prohibit trading activity on thirty separate occasions, was the type of activity that is required to be investigated to determine whether it should be reported on a SAR. However, the firm failed to take the necessary steps to determine whether the activity warranted the filing of a SAR, which ultimately meant that they firm violated the specified FINRA Rules.

Case number: 2013037709301

Lack of Supervision for Customer Accounts gets Firm Fined

A New York registered broker-dealer, was recently fined $20,000 and ordered by FINRA to pay $17,425 in restitution to customers who were charged excessive commissions for certain equity trades. These fines come from a number of findings within the firm relating to insufficient AML procedures and failing to establish and maintain a system to reasonably supervise and monitor customer accounts for manipulative trading.

Case number: 201404121890

Firm Failed to Establish an Adequate AML Program

A Miami-based firm has agreed to pay a $100,000 fine for failing to implement an adequate AML program and AML compliance procedures reasonably tailored to one of the firm’s customers that represented the majority of the accused firm’s revenues. This customer traded $1 billion of Argentinian debt during the time period between September of 2013 and March of 2015. This potentially suspicious activity should have sent red flags to the firm, prompting them to take the necessary action against the client, but an inadequate AML program kept the firm from reporting the suspicious activity, resulting in a large fine from the FINRA.

Case number: 2015043415301

Consequences Result from Failed AML Program Implementation

One firm came under scrutiny when it failed to detect and prevent widespread misconduct throughout the firm. Some of the misconduct the firm has been accused of includes committing securities fraud, submitting false information to FINRA, unlawfully selling unregistered securities, and failing to develop and implement an adequate AML system. Had the firm established and maintained supervisory procedures that were reasonably designed to achieve compliance with AML rules and regulations, this misconduct could have been detected and prevented early on.

Case number: 2011027666902

As anti-money laundering continues to be a leading issue throughout the industry, it’s important for firms to take the proper steps to alleviate such actions. AML disciplinary actions can be prevented with the use of proper annual training. To help, Quest CE offers over 40 Anti-Money Laundering courses in its extensive course catalog. This list showcases the top five AML courses for 2017:

  • Anti-Money Laundering: Review, Everyday Scenarios, and Enforcement Cases – Vol. 2
  • Anti-Money Laundering for Bank-Affiliated Broker-Dealer Representatives
  • Anti-Money Laundering and the Red Flag Rule
  • Anti-Money Laundering and Red Flags for Institutional Clients
  • Anti-Money Laundering for Financial Services Professionals

For questions regarding these or any other Anti-Money Laundering or Firm Element courses, please contact a Quest CE Sales Executive at 877-593-3366 or e-mail To view Quest CE’s Firm Element course catalog, click here.