Scottrade has been handed a $600,000 fine by the Financial Industry Regulatory Authority (FINRA) for failing to implement an adequate anti-money laundering (AML) program. By failing to implement an effective AML program, Scottrade violated certain sections of the Bank Secrecy Act and FINRA rules.
In this specific case, Scottrade is being fined for three main reasons:
1. There was only a semblance of an AML system employed at Scottrade from 2003-2005 that lacked many characteristics required given Scottrade’s business model. When creating and implementing an effective AML program that is in compliance with all regulatory body regulations, firms must take into account their specific business model.
2. Although a systemic/automated surveillance AML program was implemented after 2005, it was still lacking. Scottrade’s AML system only flagged suspicious money movement in and out of accounts. However, AML systems are required to report any violation that could aim to circumvent laws and/or regulations.
3. Scottrade's AML procedures failed to provide adequate guidance to employees as to how to detect or review transactions for potentially suspicious activity and failed to provide adequate guidance to its AML analysts for detecting and investigating potential suspicious trading.
By imposing fines, regulatory bodies have a punitive means of enforcing applicable rules and regulations designed to increase confidence in markets and make markets safer for investors. As is consistent with industry practice, Scottrade neither affirmed not denied wrongdoing when levied the $600,000 fine from FINRA.
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