Finra hit Credit Suisse Securities (USA) LLC with a $16.5 million fine on Monday for failure to monitor and detect suspicious trading and money movements.
The broker-dealer did not provide adequate review or supervision of trades from January 2011 to December 2015, missing micro-cap stock transactions and sales of unregistered securities.
“CSSU facilitated the illegal distributions of at least 55 million unregistered shares of securities for customers from the beginning of the relevant period through March 2013,” the Financial Industry Regulatory Authority Inc.
letter of acceptance, waiver and consent states .
A major hole in Credit Suisse's monitoring system is that it relied on its brokers to detect potential money laundering, according to Finra. For example, micro-cap sales on behalf of customers of a Credit Suisse affiliate were not scrutinized.
“Despite the firm's reliance on sales traders to detect and escalate potentially suspicious activity, most of the affiliate's order flow came into the firm electronically and was not seen by the CSSU sales traders,” the consent agreement states. “This activity represented a significant percentage of the daily trading volume in the stock of numerous issuers on repeated occasions. At times, it accounted for 100% of the trading in a particular security.”
In addition to the fine, Credit Suisse agreed to adopt and implement policies and procedures within 90 days to address the problems cited in the consent agreement.
“It's crucial that firms have effective AML systems in place so that they can comply with their obligations to review and report suspicious transactions, including those involving trading in micro-cap securities and potentially suspicious money transfers,” Brad Bennett, Finra executive vice president and chief of enforcement, said in a statement.
Credit Suisse neither admitted nor denied the charges but did agree to Finra's findings. The agreement does not allege fraud or deceptive conduct nor the harm of customers, a person familiar with the agreement said.
“Credit Suisse is pleased to have reached a settlement with Finra in this matter,” the firm said in a statement. “We cooperated with Finra's inquiry and have been taking appropriate internal remedial efforts.”
The Credit Suisse sanction follows
earlier AML crackdowns by both Finra and the Securities and Exchange Commission.
It's not just broker-dealers that are being prodded to step up their detection of financial crimes. Investment advisers would have to
establish AML programs under a U.S. Treasury Department rule.
