United States: In Re: Raymond James & Associates, Inc., Et Al., No. 2014043592001: Affiliates Of Financial Services Company Agree To Pay $17 Million Fine For Alleged Failure To Maintain Adequate Anti-Money Laundering Controls

On 18 May 2016, the Financial Industry Regulatory Authority ("FINRA"), a non-governmental organisation that regulates its member broker-dealers, reached a settlement with Raymond James & Associates, Inc. ("RJA"), Raymond James Financial Services, Inc. ("RJFS")—both affiliates of Raymond James Financial, Inc., a major financial services company—pursuant to which RJA and RJFS agreed to pay $17 million in fines to settle charges that their anti-money laundering ("AML") controls were ineffective. FINRA claimed that the practices at issue violated FINRA Rule 3310 (which requires FINRA members to maintain effective AML programs), FINRA Rule 2010 (which broadly requires "high standards of commercial honor and just and equitable principles of trade"), and certain other rules and regulations. In addition, RJA's AML Compliance Officer agreed to a fine of $25,000. RJA, RJFS, and RJA's AML Compliance Officer (collectively, the respondents) agreed to this settlement without admitting or denying FINRA's findings.

FINRA alleged that the respondents did not devote the resources to their AML compliance programs that were needed to match the expansion of their businesses from 2006 to 2014. In June 2014, RJA and RJFS assigned only eight AML personnel to monitor approximately 4.2 million accounts. In addition, according to FINRA, the respondents failed to establish written AML procedures, investigate suspicious activity, ensure that periodic customer reviews were conducted, conduct adequate due diligence in the course of their AML investigations, maintain a sufficiently coordinated structure of their AML compliance teams or monitor whether suspicious activity continued in customer accounts after suspicious activity reports were previously filed with the government. For example, of 140,000 suspicious incidents noted by RJFS's automated system, allegedly only 1,800 were escalated for further review and AML analysts were never required to detail their rationales when closing cases. Part of the reason such a high penalty amount was imposed on RJA and RJFS was that RJFS was a repeat offender. It had agreed in 2012 to fix similar alleged deficiencies, but evidently failed to honor that commitment.

In the course of detailing these alleged compliance failures, FINRA noted several examples of suspicious transactions that the respondents failed to adequately investigate or identify at all. But the focus of this enforcement action was on the respondents' systemic failures to implement adequate AML controls. In addition to agreeing to the fines noted above, RJA and RJFS consented to being censured and agreed to conduct comprehensive reviews of their AML compliance programs and then certify that their procedures are reasonably designed to comply with FINRA Rule 3310. In addition, RJA's AML Compliance Officer agreed not to be associated with any FINRA member for three months. This enforcement action highlights the continued regulatory scrutiny of financial institutions' AML compliance efforts.

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