Finra slaps Scottrade with $600K fine for ‘inadequate’ surveillance systems

The Financial Industry Regulatory Authority Inc. today fined Scottrade Inc. $600,000 for failing to have adequate anti-money laundering procedures in place to detect and report suspicious transactions.

In a statement, Finra noted that as an online brokerage executing more than 150,000 trades daily, Scottrade’s business model makes it vulnerable to heightened risks of identity theft, unauthorized access to customer accounts, or even money laundering activities.

The Bank Secrecy Act of 1970 requires brokerages to have anti-money laundering programs tailored to their own unique business models.

“Despite the large volume of online trading at Scottrade, the firm failed to establish any systematic or automated surveillance until 2005,” Finra executive vice president and chief of enforcement Susan Merrill said in the statement. “Then, the automated system the firm implemented remained inadequate because it focused only on suspicious trading that was accompanied by suspicious money movement.”

“Scottrade takes this very seriously” said a company spokesperson. “We have made enhancements to our anti-money laundering program and are glad to have put this matter behind us.”

The company neither admitted nor denied the allegations, but consented to be fined, censured, and to come into compliance with Finra rules on anti-money laundering policies.