LPL Financial has agreed to pay an $18 million civil penalty for the SEC described as significant shortcomings in the firm's anti-money laundering program.
The reported violations, which occurred between May 2019 and December 2023, included failures in customer identification and oversight of high-risk accounts, according to an order released by the Securities and Exchange Commission Friday.
According to the regulator's Friday order, LPL did not adequately verify customer identities in a timely manner, a cornerstone of its customer identification program. The firm also neglected to close or restrict thousands of high-risk accounts, including ones related to cannabis businesses and foreign entities, that were flagged under LPL’s own anti-money laundering policies.
“Federal law requires broker-dealers to ascertain the identity of their customers and to conduct ongoing customer due diligence to aid the government in its efforts to detect and prevent money laundering,” Stacy Bogert, associate director of the SEC’s Division of Enforcement, said in a statement Friday. “When broker-dealers like LPL fail to comply with their AML obligations, they put the securities markets at risk.”
Without admitting or denying the findings, LPL agreed to a settlement that includes the $18 million penalty, a censure, and a cease-and-desist order. The firm will also continue working with a compliance consultant to strengthen its anti-money laundering policies and procedures.
"The settlement relates to recordkeeping and retention issues. We cooperated with the SEC’s investigation and have taken proactive steps to enhance AML policies and procedures," a representative from LPL said in an emailed statement. "We take our regulatory obligations seriously and are pleased to resolve this matter."
Apart from the penalty announced Friday, LPL faced SEC charges over AML shortfalls previously in 2021, which the firm paid $4.8 million to settle. Finra also sanctioned LPL in 2015 for AML deficiencies and other compliance shortfalls.
The SEC's Friday order against LPL came amid an apparent ramp-up in enforcements from the regulator – including a combined $63.1 million in fines against 12 firms over record-keeping failures and a $40 million penalty against BMO Capital Markets for reported oversight failures in sales of mortgage-backed securities – prior to the upcoming January 20 presidential inauguration of Donald Trump.
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