The Financial Industry Regulatory Authority (FINRA) has fined Brown Brothers Harriman $8 million for anti-money laundering (AML) compliance failures, primarily due to a lack of what FINRA deems an adequate anti-money laundering program in place to monitor and detect suspicious penny stock transactions.
FINRA also says that once potentially suspicious penny stock activity was brought to the firm’s attention, BBH failed to sufficiently investigate and did not fulfill its Suspicious Activity Report (SAR) filing requirements. Plus, FINRA adds, BBH did not have an adequate supervisory system to prevent the distribution of unregistered securities.
In addition to the $8 million fine for the firm, FINRA has fined BBH’s former global AML compliance officer Harold Crawford $25,000 and suspended him for one month.
In its findings, FINRA determined “that from Jan. 1, 2009, to June 30, 2013, BBH executed transactions or delivered securities involving at least six billion shares of penny stocks, many on behalf of undisclosed customers of foreign banks in known bank secrecy havens. BBH executed these transactions despite the fact that it was unable to obtain information essential to verify that the stocks were free trading. In many instances, BBH lacked such basic information as the identity of the stock’s beneficial owner, the circumstances under which the stock was obtained, and the seller’s relationship to the issuer. Penny stock transactions generated at least $850 million in proceeds for BBH’s customers.”
FINRA also found that even though BBH knew about the penny stock transactions (which FINRA says should have raised flags) BBH did not ensure its supervisory reviews were adequate to determine whether the securities were part of an illegal unregistered distribution.
“The sanction in this case reflects the gravity of Brown Brothers Harriman’s compliance failures. The firm opened its doors to undisclosed sellers of penny stocks from secrecy havens without regard for who was behind those transactions, or whether the stock was properly registered or exempt from registration. This case is a reminder to firms of what can happen if they choose to engage in the penny stock liquidation business when they lack the ability to manage the risks involved,” says Brad Bennett, FINRA executive vice president, enforcement.
In concluding these settlements, BBH and Crawford neither admitted nor denied the charges, but consented to the entry of FINRA’s findings.
FINRA Fines BBH for AML Compliance Failures
The Financial Industry Regulatory Authority (FINRA) has fined Brown Brothers Harriman $8 million for anti-money laundering (AML) compliance failures, primarily due to a lack of what FINRA deems an adequate anti-money laundering program in place to monitor and detect suspicious penny stock transactions.