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Our Take Blog

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Our Take Blog
BD/IA to Pay $20 Million for Allowing Client to Engage in Illegal Trading 

BD/IA to Pay $20 Million for Allowing Client to Engage in Illegal Trading 

A large BD/IA agreed to pay $20 Million and admit wrongdoing to settle SEC and FinCEN charges that it failed to implement adequate policies and procedures to stop suspicious activity.  The SEC order alleges that the firm allowed a foreign broker-dealer to launder money and evade taxes for its underlying beneficial owners.  The firm ignored red flags including a high volume of penny stock transactions and actual knowledge that the foreign broker-dealer was not the beneficial owner.  The firm also ignored concerns raised by its AML Officer and failed to file Suspicious Activity Reports.  In addition to FinCEN charges of violating the anti-money laundering laws, the SEC charges the firm with several violations of the 1934 Act as well as failure to properly withhold income taxes.  The foreign broker-dealer has previously been charged with operating an unregistered broker-dealer and violations of the anti-fraud rules.

OUR TAKE: The SEC will hold market gatekeepers responsible for allowing wrongdoers to use their facilities to engage in illegal activity.  The SEC will not tolerate firms that profit from illegal activity if they knew or should have known about the underlying bad acts.  We recommend that firms implement a robust client intake due diligence process.

http://www.sec.gov/litigation/admin/2015/33-9711.pdf

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