FINRA Tolerance for AML Compliance Failures Fading

AML compliance failures are starting to get the “zero tolerance” message from FINRA. It recently announced its largest fine ever against two firms for AML compliance failures, including the suspension of the AML compliance officer. Mitch Atkins, a former FINRA official breaks down this action in a LinkedIn article. In reality, these sanctions are not too different in scope than that which was levied on Brown Brothers Harriman in 2014. The difference is there are two firms involved in this sanction. Also, the failures in the Brown Brothers case appear to be more limited to the area of low-priced securities and while that is an element of the recent action, it seems broader in scope as to the nature of the compliance failures.

At the recent FINRA Annual Conference in Washington, D.C., FINRA’s head of Enforcement, Brad Bennett, indicated in his comments during a panel discussion that there were more enforcement cases to come in the AML compliance space. Bennett stated that FINRA noted a signficant number of red flags in the recent case, but he suggested that future cases may involve actual money laundering rather than just compliance failures. I suspect these cases will be as significant or more significant given the apparent escalation of sanctions of late.

AML Compliance Failures Don’t Necessarily Mean AMLCOs will be Named

The good news is that Bennett reassured the attendees that the action against the AMLCO in this case was an exception and that FINRA is not out to get compliance officers. He insisted that FINRA carefully considers naming compliance officers and would rather not do it at all. FINRA has long stated that compliance officers who are doing their jobs and who take reasonable steps to address compliance issues will not be named in disciplinary actions. Bennett warned, however, that should senior executives ignore the calls of compliance officers for additional resources and compliance failures were the result of such decisions, FINRA would not hesitate to name them in an action.

Mitch Atkins is a consultant to broker-dealers, investment advisers and financial firms. He has over 23 years experience in the securities industry and is the founder and principal of FirstMark Regulatory Solutions based in Boca Raton, Florida.