Janney Montgomery Scott (Philadelphia, PA) agreed to pay $175K to settle FINRA charges it failed to establish certain elements of an adequate AML program.  Among FINRA's findings, Janney allegedly failed to provide branch office managers ("BOM's") with reports that contained adequate information to monitor for potential money-laundering and red flag activity.  This, in turn, precluded the Compliance from performing periodic reviews of wire transfer activity, which require either branch managers or the AML compliance officers:  

• to document reviews of AML alerts in accordance with firm procedures;
• to identify the beneficial owners and/or agents for service of process for some foreign correspondent banks accounts; and,
• establish adequate written policies and procedures that provided guidelines for suspicious activity that would require the filing of a Form SAR-SF.

    Other Alleged Violations.   FINRA further found that these alleged violations and deficiencies by Janney Montgomery Scott:

• failed to require ongoing AML training of appropriate personnel related to margin issues, entering new account information, verifying physical securities and handling wire activity.
• failed to ensure that its 3rd-party vendor verified new customers’ identities by using credit and other database cross-references;  after a vendor lapse was resolved, the firm failed to retroactively verify customer information not previously subjected to the verification process.
• failed to establish AML review procedures for activity in retail accounts serviced by institutional registered reps.
• failed to review accounts that a producing BOM serviced under joint production numbers.
• failed to evidence in certain instances timely review of LOA's, correspondence, account designation changes, trade blotters, BOM weekly review forms and BOM monthly reviews;
• failed to follow procedures intended to prevent producing BOM from approving their own errors;
• failed to follow procedures intended to prevent a branch office operations manager from approving transactions in her own account and an Assistant BOM from reviewing transactions in accounts he serviced.
• failed to establish procedures for the approval and supervision related to employee use of personal computers - during one year, it permitted certain employees to use personal computers the firm did not approve or supervise.
• failed to include a question in one year's annual acknowledgement form about disclosed and undisclosed outside securities accounts that its RRs maintained. 
• firm failed to enforce an internal policy requiring the firm's advertising principal or a BOM to pre-approve and review all employees’ radio broadcasts, TV appearances, seminars and dinners, and materials distributed at these events seminars and dinners; 
• failed to maintain in a separate file all ads, sales lit, and independently-prepared reprints for 3 years from date of last use.

FINRA further found that one or more BOM's allegedly failed to adequately supervise RR communications with the public, in that it: 

• failed to maintain a log of an RR's radio broadcasts, failed to tape and/or maintain a transcript of the broadcasts, and failed to evidence a qualified principal review or approval of the RR's statements.
• failed to retain documents reflecting the nature of seminars, materials distributed to attendee or supervisory pre-approval of the seminars;
• failed to evidence supervisory reviews, or retain transcripts, of an RR's local radio program and TV appearances, and materials used;
• failed to retain documents re: a dinner or seminar conducted by RR, as well as materials distributed.

With regard to customer option trading, the firm allegedly:

• distributed an out-of-date Characteristics and Risks of Standardized Options;
• lacked procedures for advising customers re: changes to the document and failed to document the date on which it was sent to certain customers who had recently opened options accounts;
• acting through its CROP, did not document weekly reviews of trading in discretionary options accounts. 
• failed to record the identity of the person who accepted each customer order because it failed to update its order ticket form to reflect the identity ofthe person who accepted the order.

Finally, to complete the complaint, the firm allegedly failed to review Bloomberg emails and some IM's sent/recieve.  (FINRA Case #2007009458001)

For further details on this and other cases, go to:   [FINRA Disciplinary Sanctions for January 2011]