BROWSE BY TOPIC
Stories of Interest
- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
We seek to provide information, insights and direction that may enable the Financial Community to effectively and efficiently operate in a regulatory risk-free environment by curating content from all over the web.
Stay Informed with the latest fanancialish news.
NEWSLETTERS & ALERTS
Industrial and Commercial Bank of China Settles FINRA AML Penny Stock Charges
by Howard Haykin
Industrial and Commercial Bank of China Financial Services (“ICBCFS”) agreed to pay a $5.3Mn fine and to hire an independent consultant to conduct a comprehensive review of its Anti-Money Laundry Compliance Program to settle FINRA charges that, among other things, it failed to adequately monitor and detect suspicious activity, particularly as it relates to penny stock transactions.
FINRA FINDINGS. ICBCFS employs around 66 registered individuals who operate in the firm’s NYC-based office. The firm offers securities clearing, processing and financing services to its correspondent customers through full-disclosed and omnibus clearing arrangements - a business line that was launched in late 2012.
Shortly thereafter, ICBCFS took on thousands of new customers, many of whom began purchasing and selling millions of dollars’ worth of penny stocks. From January 2013 through September 2015, ICBCFS cleared and settled the liquidation of more than 33 billion shares of penny stocks, which generated approximately $210 million for ICBCFS’s customers. However, during that timeframe ICBCFS failed to have in place a reasonably designed AML program to detect and cause the reporting of potentially suspicious transactions, particularly those involving penny stocks.
Prior to June 2014, the firm …
- had no surveillance reports designed to monitor potentially suspicious liquidations of penny stock shares;
- did not require its employees to document their review of those exception reports that were in place; and,
- did not track instances in which potentially suspicious trading activity was identified.
On or about June 2014, the SEC notified ICBCFS that its surveillance system failed to detect potentially suspicious penny stock liquidations by introduced customers. Notwithstanding the implementation of 2 new surveillance reports, the firm's amended AML Compliance Program still failed to adequately address the issues raised by the SEC, in that the firm:
- failed to provide guidance to its employees regarding the purpose of the reports, how to use the reports, and how to escalate matters of concern to firm senior management for further review.
- did not require its employees to document either their review of the new firm-issued surveillance reports or escalations to senior management of issues of concern.
Because of these deficiencies, ICBCFS did not track patterns of potentially suspicious trading activity over extended period of time, and it failed to reasonably detect and investigate red flags of potentially suspicious penny stock liquidations that may have required the filing of a suspicious activity report ("SAR").
For details on this case, go to ... FINRA Disciplinary Actions Online, and reference Case # 2015045550801.