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NEWSLETTERS & ALERTS
AML: The Luck Ran Out for This Broker
by Howard Haykin
An experienced broker with Wells Fargo Securities, who sported a heretofore clean disciplinary history, was charged with violating his ethical obligations under FINRA Rule 2010 by structuring cash deposits after successful gambling trips for the purpose of evading the filing of the required reports.
From March 2012 to March 2015, this broker took 8 trips to Las Vegas, and twice he was successful and returned home with gambling winnings. Once, he returned with ~$26,000 in cash - a combination of money he initially took with him to gamble and his winnings - and the second time, he returned home with ~$72,000 in cash.
In each case when he came back from a trip with winnings, the broker made multiple deposits below $10,000 over the course of several days or several weeks, rather than depositing the cash in a single transaction.
- In May 2014, over a 2-day period, he made cash deposits of $9,900, $9,900, and $5,700.
- In February 2015, over a 24-day period, he made cash deposits of $9,900, $9,900, $9,800, $9,800, $9,660, and $3,100.
The broker’s multiple deposits below $10,000 into 2 financial institutions over the course of several days or several weeks - rather than by a single deposit of cash – essentially masked the existence of ‘structured’ deposits that would have prompted the filings of currency transaction reports (“CTRs”).
FINRA’S CONSIDERATIONS AND JUDGMENT. The broker had extensive AML training every year on what constitutes unlawful structuring of cash transactions, and he knew from that training that financial institutions are legally required to file CTRs for cash transactions in excess of $10,000. In fact, he admitted to generally knowing that “something happened” at $10,000. He told a Wells Fargo investigator and some of his friends that he made the deposits the way that he did to avoid raising a “red flag” and having questions asked. That said, the broker failed to provide a legitimate, credible reason for structuring his deposits in the way that he did.
FINRA Hearing Officers further found that, when the ‘misconduct’ was discovered, the broker dissembled and attempted to mislead Wells Fargo and FINRA investigators. His lack of candor when his actions were discovered and his lack of credibility at the hearing further diminish his trustworthiness. Moreover, he continues to insist that he did nothing wrong.
Structuring cash deposits to avoid the filing of the required report is a crime with 3 elements: (i) the breaking of large sums of cash into smaller amounts of $10,000 or less; (ii) knowledge of the reporting requirement; and (iii) intent to evade the reporting requirement. It is unnecessary to prove a motive. It is sufficient to prove the intent to avoid the filing of the required report.
Taking into account all the circumstances of White’s misconduct and his reaction to the discovery of it, the Hearing Officers have concerns regarding his ability to comply with legal and regulatory requirements in the future. We conclude that a bar from association with any FINRA member in any capacity is appropriate and in the public interest.
NOTE: Broker has appealed the OHO sanctions to FINRA's National Adjudicatory Council ("NAC").
This case was reported in FINRA Disciplinary Actions for May 2018.
For details on this case, go to ... FINRA Disciplinary Actions Online, and refer to Case #2015045254501.