Acting through Homnick, the firm’s president, chief compliance officer (CCO) and AML compliance officer (AMLCO), the Firm failed to comply with AML requirements. The Firm’s AML compliance program, which Homnick implemented, did not fully comply with the requirements of the Bank Secrecy Act (BSA) or the regulations thereunder, and violated NASD® Rules 3011(a) and (b). The AML procedures in effect required the firm to make a preliminary risk assessment for each existing and potential customer of the firm, and the firm’s representatives were required to document any significant information they learned pursuant to such risk assessment, but the firm did not create or maintain written risk assessments for its customers.
The firm’s AML procedures required scrutiny of the activities of each firm customer organized as a limited liability company (LLC); specifically, for LLC customers, the firm and its registered representatives were to assess the correlation between their business activities and their formation documents and to conduct further investigations to determine the customer’s risk profile. These assessments and determinations of risk profiles were not conducted. Several accounts that were LLCs that engaged in suspicious transactions did not provide formation documents.
The AML procedures had a section that described the process firm employees were to use to report suspicious customer activities, but these procedures were not followed. In addition, registered representatives were required, upon detection of suspicious activity in customer accounts, to consult with one of the firm’s designated principals, one of whom was Homnick; no firm representative reported to, or consulted with, the firm principals about suspicious customer activities. Moreover, the firm’s procedures identified a form called the Preliminary Suspicious Activity Report (P-SAR); the purpose of the form was to identify, in writing, suspicious activities for Homnick’s internal review, but no P-SARs were completed or submitted. Furthermore,Homnick was assigned the responsibility for filing Suspicious Activity Reports (SARs) and was responsible for drafting, implementing and maintaining the AML program and procedures at the firm, but he did not file any SARs and did not consider filing any SARs. FINRA also found that numerous suspicious transactions were conducted by firm customers, and the firm, acting through Homnick, did not conduct a reasonable investigation, in that they failed to file a SAR, consider filing a SAR or document rationale for not filing a SAR.
Grand Capital Corp.: Censured; Fined $20,000 (In light of the firm’s revenues and financial resources, among other things, a lower fine was imposed.)
Eliezer Gross Homnick: Fined $10,000, Suspended in Principal capacity only for 1 month; and Required to complete eight hours of anti-money laundering (AML) training.