Aegis Capital Fined Into Submission for Failure to File Suspicious Activity Reports

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Inaction and The Status Quo are Expensive

“The clampdown on money laundering and corruption is the common responsibility of all the countries in the world.”
– Wang Zhaowen, spokesman for the Bank of China

In the financial world, lackluster leadership coupled with inadequate compliance and anti-money laundering (AML) frameworks prove costly to the firm. Most recently, Aegis Capital found out the hard way; fined $1.3 million for its transgressions. The Securities and Exchange Commission (SEC) imposed a $550,000 fine for failure to file “suspicious activity reports”. In addition, the Financial Industry Regulatory Authority (FINRA) levied a $750,000 fine for failure to monitor and investigate overseas trades involving billions of shares of low-priced securities.

Legacy Matter or Business as Usual?

The brokers involved in the multi-year string of events have since departed the firm. Not to mention, the SEC fined the CEO $40,000 and a former Aegis AML Officer $20,000. The million dollar question then, no pun intended, is whether the aggregate fines are incentive enough to prevent future noncompliant behavior and occurrences. The record indicates Aegis Capital blatantly ignored suspicious activity.

“Several of these customers were foreign financial institutions that effected transactions on behalf of their underlying customers, all of whom were unknown to Aegis. The firm did not identify these trades as suspicious even after its clearing firm alerted Aegis to AML red flags and specific suspicious low-priced securities transactions.”

Integrity is doing the right thing when nobody is watching; arguably a forgone and uncommon virtue these days, especially on Wall Street. Plausible deniability and ignorance is not the issue; the financial firm and its employees know right from wrong. Turning a blind eye equates to complicity.

“Money laundering is giving oxygen to organised crime.”
– Enrique Peña Nieto, President of Mexico

Business Ownership of Compliance Program

In the long run, a sophisticated Anti-Money Laundering program is worth its weight in gold; it discourages drug traffickers and terrorists from laundering ill gotten proceeds. However, and as often is the case, adequate training is routinely overlooked and not prioritized.

“Aegis’ employees — including those employees responsible for reviewing trades — never received any training from Aegis that included examples of the red flags associated with low-priced securities transactions that were outlined in the firm’s written supervisory procedures,” the SEC said.

An effective training program is a vital part of the solution in addressing AML and compliance issues. For instance, ACAMS (https://www.acams.org) offers a Certified Anti-Money Laundering Specialist (CAMS) credential. Moreover, the program is the gold standard in AML certifications and recognized by private institutions, governments and law enforcement. And rest assured, the cost of the program is typically less expensive than the fines imposed by regulatory agencies.