The Firm failed to adequately implement or enforce its anti-money laundering (AML) compliance program and otherwise comply with its AML obligations, as the firm did not identify and analyze numerous transactions to determine if they were suspicious and were required to be reported to the Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) on a Suspicious Activity Report-Securities/ Futures Form (Form SAR-SF).
The Firm permitted foreign corporate accounts, all of which were controlled by one individual, to deposit a total of approximately 279 million shares of low-priced securities and/or penny stocks into the accounts, and after the securities were deposited into the accounts, they were promptly sold and all proceeds from the transactions were disbursed by wires to first-party bank accounts maintained with a Scotland bank. The Firm permitted these suspicious activities to occur without conducting adequate AML reviews and failed to file Forms SAR-SF as appropriate.
The Firm had no written procedures
In fact, the Firm relied primarily on transfer agents to determine whether the securities were free trading.
Upon receipt of a large block of a low-priced stock (which was, in certain instances, unregistered), the firm’s due diligence was essentially limited to verifying that the security was electronically quoted and contacting the transfer agent to determine the number of outstanding shares and whether the shares were free trading. Notably, the Firm failed to inquire about the length of time the securities had been held; how, when, and under what circumstances the securities had been acquired; the relationship, if any, between the customer and the issuer; and/or how much stock was owned by or under the customer’s control.