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February 05, 2014 at 06:27 AM
The Financial Industry Regulatory Authority said Wednesday that it had fined New York-based Brown Brothers Harriman & Co. $8 million for substantial anti-money laundering compliance failures — the biggest AML-related fine levied by the self-regulator.
The firm’s AML violations include, among other related violations, failured to monitor penny stock trades — some to undisclosed customers in countries known for bank secrecy — that netted its clients at least $850 million.
BBH’s former global AML compliance officer, Harold Crawford, was also fined $25,000 and suspended for one month.
FINRA says that BBH also failed to sufficiently investigate potentially suspicious penny stock activity brought to the firm’s attention and did not fulfill its Suspicious Activity Report (SAR) filing requirements. In addition, BBH did not have an adequate supervisory system to prevent the distribution of unregistered securities.
The second highest AML-related fine was ordered way back in January 2007, when FINRA — then the National Association of Securities Dealers — fined Banc of America Investment Services $3 million for failing to comply with AML rules in connection with high-risk accounts.
Assessing firms’ AML procedures is one of FINRA’s exam priorities this year.
Brad Bennett, FINRA’s executive vice president of Enforcement, said in a statement that the sanction in this case “reflects the gravity of Brown Brothers Harriman’s compliance failures. The firm opened its doors to undisclosed sellers of penny stocks from secrecy havens without regard for who was behind those transactions, or whether the stock was properly registered or exempt from registration. This case is a reminder to firms of what can happen if they choose to engage in the penny stock liquidation business when they lack the ability to manage the risks involved.”
