Raymond James agreed Wednesday to pay $17 million to the Financial Industry Regulatory Authority for “widespread failures” related to the firm’s anti-money laundering programs.
Raymond James & Associates Inc., the employee advisor channel, was fined $8 million, and Raymond James Financial Services Inc., the independent advisor channel, was fined $9 million for failing to establish and implement adequate AML procedures, which resulted in the firms’ failure to properly prevent or detect, investigate and report suspicious activity from 2011 to 2014.
RJA’s former AML compliance officer, Linda Busby, was also fined $25,000 and suspended for three months.
According to FINRA, RJA and RJFS’ significant growth between 2006 and 2014 “was not matched by commensurate growth” in the firms’ AML compliance systems and processes.
“This left RJA and Busby, as RJA’s AML compliance officer from 2002 to February 2013, and RJFS unable to establish AML programs tailored to each firm’s business, and forced them instead to rely upon a patchwork of written procedures and systems across different departments to detect suspicious activity,” FINRA says.
The patchwork of procedures and systems lead to certain “red flags” of potentially suspicious activity going undetected or inadequately investigated, FINRA says.
The failures were “particularly concerning,” FINRA states, given that RJFS was sanctioned in 2012 for inadequate AML procedures and, as part of that settlement, had agreed to review its program and procedures and certify that they were reasonably designed to achieve compliance.
“Raymond James had significant systemic AML failures over an extended period of time, made even more egregious by the fact the firm was previously sanctioned in this area,” said Brad Bennett, FINRA’s executive vice president and chief of enforcement, in a statement announcing the fine. “The monitoring for suspicious transactions is an essential part of protecting our financial system, and firms must allocate adequate resources to their AML compliance efforts. This case demonstrates that when there are broad-based failures within specific areas of responsibility, we will seek individual liability where appropriate.”
During its investigation, FINRA found that the Raymond James units failed to conduct required due diligence and periodic risk reviews for foreign financial institutions, and that Busby failed to ensure that RJA’s reviews were conducted.
RJFS also failed to establish and maintain an adequate customer identification program, the self-regulator says.
In concluding the settlement, Raymond James and Busby neither admitted nor denied the charges but consented to the entry of FINRA’s findings.
Raymond James said in a Wednesday statement that the settlement relates to system and procedure deficiencies and the thoroughness of Raymond James’ U.S. AML program from 2011 to 2014, “which has undergone significant resource, process and technology enhancements aligned with the firm’s measured and thoughtful growth strategy.”
The enhancements include “a marked increase in our AML associates, hiring a new chief AML officer with extensive experience, expanded training for all associates, and the integration of Mantas, a leading AML software solution, to better monitor and detect suspicious activity.”
Raymond James has also “begun the process of exiting our U.S. third-party foreign correspondent business, excluding operations in Europe and Canada,” and the firm “will continue to refine our program to address evolving regulatory expectations and ensure we are doing our part to reduce criminality in the financial system. We have fully accrued the settlement amount.”
— Check out Raymond James to Roll Out Mobile App, Cybersecurity Feature on ThinkAdvisor.