Business may by booming but to avoid costly FINRA fines, Compliance Officers should be mindful their programs are keeping up with the pace.
In the MyComplianceOffice June Webinar, guest presenters Brian Rubin and Andrew McCormick of Sutherland Law highlighted the largest FINRA enforcement cases of 2016 to date. Among the cases presented, one could find a reoccurring theme from FINRA. When a firm grows, so too must its compliance system.
To hear the recorded segment from this Webinar, click here.
In one instance cited during the webinar, two affiliated firms were required to pay a combined $17 million in fines for alleged widespread AML supervisory deficiencies. In this case, FINRA alleged that the deficiencies caused the failure to prevent or detect, investigate, and report suspicious activity over a several-year period.
According to data available, FINRA’s main issue during the case was that over an 8-year period the firm grew substantially but the firm's AML compliance system did not experience a similar growth.
The regulator described the firm's AML programs as a "patchwork of written procedures and systems across different departments." FINRA noted that there was s not a broad supervisory system or program connecting them. The firms could not identify, investigate or monitor potential red flags. Because of this, red flags went undetected.
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Compliance Officer Liability
There was a former compliance officer at the firm who was also swept into this issue. The officer was fined $25,000 and suspended for 3 months.
Brad Bennett, FINRA's Chief of Enforcement said in a press release about this case, "Firms must allocate adequate resources to their AML compliance efforts."
According to the June Webinar presenters, “AML is becoming a very popular topic for FINRA, resulting in very significant fines over the past few years. Firms should consider where their programs are at and make sure that everything is working effectively as it should be.”
One of the firms fined had a very similar enforcement action just a few years earlier. They said they would update and review and improve their AML supervision and policies and procedures but had the same issues come up through enforcement again. This may have led to a larger fine for the firm.
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