Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Tuesday, February 2, 2010

FINRA Fines Two Firms for Deficiencies in AML Programs

FINRA fined two firms for inadequate anti-money laundering (AML) programs.  Penson Financial Services, a Dallas-based securities clearing firm, settled charges and agreed to pay a fine of $450,000 for failing to establish and implement an adequate anti-money laundering (AML) program to detect and trigger reporting of suspicious transactions, as required by the Bank Secrecy Act and FINRA rules and other violations.  In a similar matter, FINRA fined Pinnacle Capital Markets of Raleigh, NC, $300,000 for failing to implement AML procedures reasonably designed to detect and cause the reporting of suspicious activity as well as to verify the identity of customers.

 A firm's AML procedures must address a number of areas, including monitoring transactions to detect and determine whether to report suspicious activity where appropriate. For example, when potentially suspicious activity that warrants further investigation is identified, including higher-risk penny stock deposits and liquidations or suspicious activity involving customers from high-risk foreign jurisdictions, a firm must initiate a review of that activity promptly and complete its review within a reasonable period of time. FINRA has advised firms that in designing their AML programs, they should consider factors such as their size, location, business activities, the types of accounts they maintain and the types of transactions in which their customers engage. FINRA also has instructed clearing firms to consider conducting computerized surveillance of account activity to detect suspicious transaction.

In concluding these settlements, Pinnacle and Penson neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

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