A FINRA hearing panel expelled AIS Financial, Inc. for having "disregarded its AML responsibilities."  In its announcement, FINRA said the Westlake Village, CA, firm engaged in "systemic Anti-Money Laundering violations."  The firm allegedly:  (i) failed to implement and enforce an AML program;  (ii) ignored prominent red flags;  (iii) ignored blatant suspicious activity for an extended period of time for financial gain.

        Detailed FINRA Charges.  The hearing panel found that from November 2005 to December 2007, AIS:

• failed to ID, investigate and report suspicious penny stock activity in 3 instances - supposedly motivated by commissions earned on the liquidation of billions of shares of penny stocks from numerous customer accounts.  AIS allowed the customers to make these transactions, turning a blind eye to suspicious activity, which the firm then concealed from the regulators.

• in one instance, failed to report suspicious activity that occurred in 2 corporate accounts controlled by a money management firm based in Costa Rica, whose owner had been the subject of significant SEC actions for securities fraud for engaging in an Internet manipulative scheme.  The FINRA panel found that the firm permitted the 2 accounts to deposit and liquidate billions of shares of numerous penny stock issuers, generating over $3mn in sales proceeds for the customers and $53K in commissions. 

• permitted 5 accounts, controlled by a customer and his nephew - both of whom had disciplinary histories and criminal indictments for engaging in organized criminal activity and money laundering prior to opening accounts at AIS - to deposit and liquidate penny stocks in their accounts just 2 months after the SEC had charged them with securities fraud.

• permitted 20 customers to deposit and liquidate approximately 65 million shares of low-priced and thinly traded Asia Global Holdings Corp. stock - which generated over $5mn in sales proceeds and $243K in commissions.  The red flags on these transactions included suspicious new account forms for the customers, and liquidation activity that coincided with spikes in AAGH's trading volume.

        FINRA Staff Credits.   Michael Gross and Sean Firley, both Enforcement Senior Regional Counsel, represented FINRA at the hearing.   For further details, go to:   [FINRA News Release, 4/4/11]