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Regulatory Sanctions

Broker Lies to ‘Protect’ Customer During an AML Investigation

October 22, 2018

by Howard Haykin


An internal AML investigation focuses on 2 suspicious deposits by a corporate customer that’s owned and controlled by a foreign national. The broker is asked to get explanations for these deposits, knowing that his answers may result in the closing or suspension of the customer accounts. Should the broker serve his member firm or should he lie to protect his customer? IT’S A TOSS-UP. [Though we already know how it plays out.]


A broker, who was dually employed by HSBC Securities (USA) and its affiliated bank - HSBC Private Bank International - served as the relationship manager and General Securities Rep assigned to the brokerage and bank accounts of a corporate customer – which, in part, was owned and controlled by a foreign national (“YR”).  YR and any account for which he was a beneficial owner were subject to enhanced diligence.


IN NOVEMBER 2013, … in connection with its AML reviews, the bank’s compliance department asked the broker to obtain information about a $100,000 deposit into the corporate customer’s bank account. In an exchange of emails, YR explained that the deposit involved lobbying fees. When the broker later followed up, YR indicated he could not provide additional details.


At that point, the broker “went off-line” and called YR, using his personal cell phone. After the call, YR changed his explanation, claiming that the deposit represented legal fees paid in connection with the exploration of a business opportunity – which, according to FINRA, was not true. The broker provided YR’s 2nd explanation to the Bank's compliance department and no further review was conducted.


IN APRIL 2014, … the Bank's compliance department asked Jimenez to obtain information about a $165,000 deposit into the corporate customer’s bank account. As before, the broker communicated with YR, first by e-mail and then with his personal cell phone. After initially saying the deposit was to be used to purchase currency for a third party, YR changed his explanation to say it was the proceeds from the sale of a vehicle. Once again, the broker gave the 2nd explanation to the Bank's compliance department.


WHAT WENT WRONG.    We don’t know when or how the firm or FINRA discovered the truth, but we do know how it ended for this broker:

  • On 10/14/16, HSBC Securities (USA) terminated (U5’d)  the broker’s employment for ‘providing false information regarding the purpose of certain customer deposits’.
  • On 7/19/18, FINRA barred the broker from the industry on charges he violated FINRA 2010.



This case was reported in FINRA Disciplinary Actions for September 2018.

For details on this case, go to ...  FINRA Disciplinary Actions Online, and refer to Case #2016051705702.