The financial advisory firm says that it has taken measures to bolster its AML defenses.
The Financial Industry Regulatory Authority (FINRA) has fined the financial advisory firm Raymond James a total of $17 million, citing deficiencies in its ant-money laundering (AML) staffing and systems, which the firm says has been rectified via “significant resource, process and technology enhancements.”
FINRA officials fined Raymond James & Associates, Inc. (RJA) $8 million, and Raymond James Financial Services, Inc. (RJFS) $9 million “for failing to establish and implement adequate AML procedures, which resulted in the firms’ failure to properly prevent or detect, investigate, and report suspicious activity for several years,” according to the self-regulating authority.
“RJA’s former AML Compliance Officer, Linda L. Busby, was also fined $25,000 and suspended for three months,” according to FINRA.
In the settlement with FINRA, RJA, RJFS and Busby neither admit nor denied the charges, “but consented to the entry of FINRA’s findings,” FINRA officials say.
The crux of the case against RJA and RJFS is that they had “significant growth between 2006 and 2014.” However, the regulator charges that firm did not commensurately expand its AML compliance systems and processes.
“This left RJA and Busby, as RJA’s AML Compliance Officer from 2002 to February 2013, and RJFS unable to establish AML programs tailored to each firm’s business, and forced them instead to rely upon a patchwork of written procedures and systems across different departments to detect suspicious activity,” according to FINRA.
FINRA further charges that the firm may have missed “certain ‘red flags’ of potentially suspicious activity that “went undetected or inadequately investigated.”
The FINRA investigation also alleges that the RJA and RJFS “did not conduct required due diligence and periodic risk reviews for foreign financial institutions, and that Busby failed to ensure that RJA’s reviews were conducted,” FINRA officials say. “RJFS also failed to establish and maintain an adequate Customer Identification Program.”
The regulator adds that, “these failures are particularly concerning given that RJFS was sanctioned in 2012 for inadequate AML procedures and, as part of that settlement, had agreed to review its program and procedures, and certify that they were reasonably designed to achieve compliance.”
In response, a spokesman for Raymond James says that major changes are underway.
“This settlement relates to system and procedure deficiencies and the thoroughness of Raymond James’ U.S. AML program from 2011 to 2014, which has undergone significant resource, process and technology enhancements aligned with the firm’s measured and thoughtful growth strategy,” says Steve Hollister, director, public communications for Raymond James.
“These include a marked increase in our AML associates, hiring a new chief AML officer with extensive experience, expanded training for all associates, and the integration of Mantas, a leading AML software solution, to better monitor and detect suspicious activity,” Hollister says. “We have also begun the process of exiting our U.S. third-party foreign correspondent business, excluding operations in Europe and Canada.”
The firm will be refining its program “to address evolving regulatory expectations and ensure we are doing our part to reduce criminality in the financial system,” Hollister says. “We have fully accrued the settlement amount. Raymond James has a sustained history of conservative, long-term focused management with an emphasis on putting clients’ interests first, which includes ensuring policies and procedures protect clients.”
Overall, the Raymond James case “demonstrates that when there are broad-based failures within specific areas of responsibility, we will seek individual liability where appropriate,” says Brad Bennett, FINRA’s executive vice president, in a prepared statement.
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