Last week the Financial Industry Regulatory Authority levied its largest fine for anti-money laundering ("AML") compliance failures. It penalized Brown Brothers Harriman & Co. ("BBH") $8 million for, among other things, failure to have an adequate AML program in place to monitor and detect suspicious penny stock transactions. BBH also failed to sufficiently investigate potentially suspicious penny stock activity brought to the firm's attention and did not fulfill its Suspicious Activity Report filing requirements. In addition, BBH did not have an adequate supervisory system to prevent the distribution of unregistered securities. BBH's former Global AML Compliance Officer, Harold Crawford, was also fined $25,000 and suspended for one month. In concluding these settlements, BBH and Crawford neither admitted nor denied the charges, but consented to the entry of FINRA's findings. FINRA Press Release.
FINRA's action, especially as it related to BBH's AML compliance officer, makes real the fear many in the financial industry held: regulatory focus on individuals. Last October Representative Maxine Waters, for example, introduced the "Holding Individuals Accountable and Deterring Money Laundering Act," H.R. 3317, which would amend the Bank Secrecy Act to: (1) increase civil penalties for willful violations of AML laws; (2) increase the civil penalty for negligent violations of AML laws and impose a penalty on partners, directors, officers, or employees of a financial institution for violations; and (3) impose a 20-year maximum prison term for individuals who facilitate evasion of an anti-money laundering program or control.
The emphasis on individual responsibility was reiterated by Jennifer Shasky Calvery, Director of the Treasury Department's Financial Crimes Enforcement Network. In a speech given last month, Shasky Calvery noted: "A financial institution's leadership - to include the board of directors, executive management, and owners and operators - is responsible for performance in all areas of the institution, including compliance with the Bank Secrecy Act. The commitment of an organization's leaders should be clearly visible, as the degree of that commitment will have a direct influence on the attitudes of others within the organization."