Record $80M fine for Canaccord Genuity LLC should serve as ‘wake-up call’ to broker-dealers, says FinCEN

The US Treasury’s Financial Crimes Enforcement Network has imposed an $80 million civil penalty on Canaccord Genuity LLC for violations of the Bank Secrecy Act, describing the enforcement action as the largest of its kind against a broker-dealer and a warning to the wider industry.

FinCEN said the firm admitted willful failure to meet core anti-money-laundering obligations, including maintaining an effective AML program, filing required suspicious activity reports and conducting appropriate due diligence tied to certain accounts.

“Today’s action should be a wake-up call to broker-dealers that willfully fail to comply with their obligations to safeguard the financial system from illicit actors,” FinCEN Director Andrea Gacki said in announcing the action.

According to FinCEN’s consent order, the violations stemmed from significant weaknesses in the firm’s compliance framework over several years. Regulators found the broker-dealer’s systems and internal processes were inadequate to properly detect and escalate suspicious activity tied to its trading activity, particularly in microcap securities.

The order states that Canaccord failed to submit at least 160 suspicious activity reports connected to trading in dozens of over-the-counter securities. Regulators said the activity involved thousands of transactions that raised indicators of potentially manipulative or suspicious trading but were not reported as required.

FinCEN said those lapses deprived law enforcement of critical intelligence related to potential financial misconduct and market abuse.

Investigators also determined the firm’s AML surveillance and review processes were poorly resourced relative to the level of trading activity flowing through the platform. Compliance personnel responsible for reviewing alerts were overwhelmed by the volume of flagged activity and lacked sufficient training and experience to properly assess risks, according to the order.

Customer due diligence procedures were also found to be insufficient. FinCEN said the firm allowed certain higher-risk accounts to transact in US markets without appropriate scrutiny, increasing the risk that its platform could be used to facilitate illicit financial activity.

Multiple regulators

The enforcement action forms part of a broader coordinated resolution with multiple regulators which also includes the SEC and FINRA.

In a statement accompanying the settlement, Canaccord Genuity Group Inc. said the agreement resolves the investigation into historical deficiencies in its US broker-dealer’s AML program and reporting processes.

The firm said it has taken steps to strengthen its compliance infrastructure, including enhancing surveillance systems, expanding AML staffing and implementing additional controls intended to improve monitoring and reporting of suspicious activity.

“The Board is satisfied that these regulatory matters are now resolved and that the underlying conduct is in our past,” said Michael Auerbach, Lead Independent Director of Canaccord Genuity Group Inc. “Since these matters came to light, we have overseen a wholesale change in compliance leadership and oversight, working closely with management to enhance the culture of compliance, while engaging constructively with regulators. This reflects our responsibility to all stakeholders and our enduring commitment to maintaining trust, transparency, and sound governance.

FinCEN officials emphasized that broker-dealers play a critical role in protecting the integrity of US financial markets and must ensure their compliance programs are capable of identifying and reporting potential financial crime.

The agency said the case underscores the consequences for firms that fail to build AML frameworks capable of keeping pace with the scale and risk profile of their trading operations.