Credit Suisse Fined $16.5M by FINRA for Weak Anti-Money Laundering Policies

“However, the systems and procedures the firm used to monitor trading for other purposes were not designed to detect potentially suspicious activity in order to cause the filing of a SAR, where appropriate, and the other departments and branches of the firm did not effectively assume responsibility for reviewing trading for AML reporting purposes,” according to the FINRA action.

For example, FINRA cites the trading of one of Credit Suisse’s customers, a New York-based hedge fund, which followed patterns commonly associated with microcap fraud, such as depositing and then quickly selling, with the proceeds being wired out of the account shortly thereafter. However, no one at Credit Suisse reviewed the activity in the account for AML purposes. 

The action also found that Credit Suisse’s reliance on reps to escalate potentially suspicious trading failed to account for the fact that most orders it received from its foreign affiliates came in to the firm electronically and thus were not seen by the firm’s sales traders.

From January 2011 through December 2015, Credit Suisse also failed to effectively review potentially suspicious money transfers. “The firm used an automated surveillance system to identify red flags of potentially suspicious activity,” according to FINRA.

Further, FINRA found that Credit Suisse’s procedures were deficient as it relates to compliance with the prohibition of the sale of unregistered securities.

“Certain Credit Suisse customers deposited and sold microcap shares through the firm, which should have raised red flags indicating that the shares were potentially part of an illegal distribution. The firm’s procedures failed to instruct its representatives, prior to executing trades in microcap securities, how to determine whether those securities were registered or subject to an exemption from registration,” the action states.

These failures, FINRA continued, “extended to potentially suspicious trades made in omnibus accounts of the firm’s foreign affiliates. As a result, FINRA found that from 2011 to 2013, the firm facilitated the illegal distribution of at least 55 million unregistered shares of securities. The firm subsequently implemented additional procedures limiting the trading of microcap securities.”

FINRA’s AML Investigative Unit identified the violations during an examination of the firm. The investigation was conducted by the Department of Enforcement.

In settling the matter, Credit Suisse neither admitted nor denied the charges but consented to the entry of FINRA’s findings.

— Check out Deutsche Bank to Pay $9.5M SEC Fine on Research Report Failures on ThinkAdvisor.