U.S.-based Credit Suisse Securities LLC agreed Monday to pay $16.5 million to the Financial Industry Regulatory Authority for anti-money laundering violations involving microcap stock transactions.
According to FINRA's action, Credit Suisse's suspicious activity monitoring program was deficient on two fronts.
Credit Suisse primarily relied on its registered reps to identify and escalate potentially suspicious trading, including in microcap stock transactions, but "high-risk activity was not always escalated and investigated as required," FINRA states.
Also, the firm's automated surveillance system to monitor for potentially suspicious money movements was not properly implemented, according to FINRA.
"A significant portion of the data feeds into the system were missing information or had other issues that compromised the system's effectiveness," the FINRA action states.
"The firm also chose not to utilize certain available scenarios designed to identify common suspicious patterns and activities, and it failed to adequately investigate activity identified by the scenarios that the firm did utilize."
AML violations were the third top FINRA enforcement issue for 2016 measured by total fines assessed, coming in at $18.6 million in fines (18 cases), according to recent research by the law firm Sutherland Asbill & Brennan.
"It's critical that firms have effective AML systems in place so that they can comply with their obligations to review and report suspicious transactions, including those involving trading in microcap securities or potentially suspicious money transfers," said Brad Bennett, FINRA's executive vice president and chief of enforcement, in announcing the fine.
FINRA found that from January 2011 through September 2013, Credit Suisse failed to effectively review trading for AML reporting purposes.
The firm relied on its registered reps, who were the primary contact with the customers, to identify and report to its AML compliance department activity or transactions that were unusual or suspicious based on "red flags" described in Credit Suisse's AML policies, FINRA states.
Credit Suisse's AML compliance department was then required to investigate the potentially suspicious activity, document its findings and file Suspicious Activity Reports where appropriate.
