This month, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) assessed an $80 million penalty against Canaccord Genuity LLC for willful violations of the Bank Secrecy Act (BSA) — the largest ever imposed against a broker-dealer for violating the BSA.
Overview of the Bank Secrecy Act and AML Compliance Requirements
The BSA is the U.S.’s primary anti-money laundering and counter-terrorism finance law. Also known as the Currency and Foreign Transactions Report of 1970, the BSA was passed to help enforcement authorities prevent and detect financial crimes, such as money laundering, terrorism financing, and sanctions evasion. Administered by the US Treasury’s FinCEN bureau, the law requires financial institutions to implement robust compliance programs, maintain financial records and report suspicious financial transactions to government authorities.
Key Compliance Failures Identified in the Broker-Dealer Case
According to FinCEN, Canaccord failed to establish sufficient internal controls to monitor transactions for suspicious activity, and failed to create and maintain an effective anti-money laundering (AML) program. As a result, Canaccord did not timely report numerous securities fraud schemes that “caused significant economic harm to innocent investors.” FinCEN further reported that Canaccord neglected to file at least 160 suspicious activity reports (SARs) which involved thousands of suspicious transactions.
“FinCEN is committed to holding accountable financial institutions of all types—including institutions accessing our world-class capital markets—that willfully ignore their role in preventing and reporting illicit actors who seek to take advantage of hardworking Americans,” said FinCEN Director Andrea Gacki.
As part of its resolution of the allegations, Canaccord admits that it willfully violated the BSA, including by failing to develop, implement, and maintain an effective AML Program; failing to conduct required due diligence on correspondent accounts for foreign financial institutions; and failing to file SARs. FinCEN cooperated with the U.S. Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FIRA) on the enforcement action.
FinCEN Whistleblower Program for Reporting BSA Violations
In order to help with BSA enforcement matters, FinCEN has a whistleblower program that financially rewards individuals who alert authorities to alleged money laundering violations and other BSA allegations. Created in January 2021 as part of the fiscal 2021 National Defense Authorization Act, the whistleblower program allows whistleblowers to submit tips to provide original information about money laundering, sanctions evasion, or other violations of the BSA. In order to qualify for a financial award, whistleblowers must meet the program’s eligibility requirements and the monetary sanctions obtained by FinCEN as a result of the whistleblower’s tip must exceed $1 million. The law protects whistleblowers by allowing them to file anonymously through an attorney and provides for certain protections of the whistleblower’s identity. Whistleblowers who are convicted of a criminal violation related to the illegal conduct are not eligible for financial rewards. The whistleblower need not be a U.S. citizen or located in the United States.
As the most successful whistleblower law firm, Phillips & Cohen is committed to helping whistleblowers safeguard our nation’s financial institutions. If you know of potential violations of the BSA, contact Phillips & Cohen for a free confidential review of your allegations.