RBC Capital Markets Settles FINRA AML Charges for $275K
RBC Capital Markets will pay $275,000 to settle FINRA charges that anti-money laundering procedures in its wealth management division could have missed suspicious transactions.
According to the FINRA letter of acceptance, waiver and consent signed last week, the issues arose during a cycle exam by the brokerage self-regulatory organization. The lapses in question allegedly took place between February 2016 and September 2023.
During that time, the firm’s wealth management division offered brokerage and investment advisory services to customers. It implemented surveillance systems that could trigger alerts for potentially suspicious transactions, including unusual money movements by a particular customer.
According to FINRA, an automated system would generate an alert when the thresholds of a certain rule were triggered, but FINRA claimed the monitoring rules were configured so they wouldn’t catch many of the movements they were meant to detect.
In one case, a rule was utilized to identify securities accounts used for fund movements without engaging in securities trading, but the firm set the triggers based on an account’s margin balance (which was typically below the minimum threshold) rather than the account balance.
A second rule was implemented for accounts that conducted near-identical credit and debit transactions, but the firm set the thresholds for total credits too high.
RBC intended a third rule to flag accounts with a high volume of “journal” transactions (defined as moving cash between internal accounts that might indicate unauthorized third-party money movements). But the firm received too many false positives, including transfers between accounts belonging to the same person.
As a result, RBC failed to generate alerts or red flags about suspicious money movements that should otherwise have been probed. While RBC allegedly delegated two groups to assess the effectiveness of the rules, they didn’t have procedures in place “for the two groups to coordinate or escalate concerns.”
“Consequently, the three rules that failed to generate useful alerts remained in place for years, and during this period, the firm failed to identify, investigate and report suspicious transactions that these rules were designed to detect,” the letter read.
“RBC is pleased to have this matter resolved,” a firm spokesperson said. “The firm remains committed to strong compliance practices and continuously works to strengthen our monitoring capabilities in line with regulatory expectations.”
FINRA rules mandate that each registrant develop written AML programs to comply with the Bank Secrecy Act, and broker/dealers are required, in certain circumstances, to file suspicious transaction reports with the Financial Crimes Enforcement Network.
Earlier this year, Cetera agreed to pay $1.1 million to settle FINRA charges that its anti-money laundering oversight wasn’t set up to catch suspicious transactions. The allegations specifically involved transactions involving low-priced securities commonly known as microcap or penny stocks, which tend to be volatile and trade in low volume, making them susceptible to price fluctuations from relatively small trades.
Last July, the U.S. Treasury Department postponed a rule adopted under the Biden administration requiring SEC-registered advisors to implement AML programs and submit reports to FinCEN for certain transactions.
Industry advocates had lobbied for Treasury to postpone the rule, and in doing so, it signaled an intent to “revisit” it, acknowledging that while the rule seeks to address “illicit finance risks” from criminals and foreign adversaries, it “must be effectively tailored to the diverse business models and risk profiles of the investment advisor sector.”
