FINRA Levies Joint $1.5Million Fine against Wells Fargo Affiliates

The Financial Industry Regulatory Authority (FINRA) has issued a collective fine for two broker-dealers under common control, Wells Fargo Advisors (WFA) and Wells Fargo Advisors Financial Network (WFAFN) for $1.5 million.

FINRA is no stranger to fines, having levied a $6 million fine against Merrill Lynch for failing to prevent naked short selling, while also issuing a warning on penny stocks for market participants during the same month. As recently as yesterday, Investment Center’s Douglas Wright was elected to the FINRA Committee.

In its latest edict, WFA and WFAFN are responsible for a joint penalty of $1.5 million for Anti-Money Laundering (AML) Anti-Money Laundering (AML) Anti-money laundering (AML) is a term that describes laws, processes, and regulations that are intended to prevent illegally obtained funds from being disguised as income gained through legitimate means. The fundamental purpose of the AML laws is to help safeguard, detect, and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.Most exchanges have AML measures that include identity verification Anti-money laundering (AML) is a term that describes laws, processes, and regulations that are intended to prevent illegally obtained funds from being disguised as income gained through legitimate means. The fundamental purpose of the AML laws is to help safeguard, detect, and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.Most exchanges have AML measures that include identity verification Read this Term) failures. FINRA has found the violations to be nearly a decade long, failing to administer approximately 220,000 new customer accounts to the required identity verification process.

AML compliance program requirements stipulate that broker-dealers must effectively provide and maintain a written Customer Identification Program (CIP) that allows them ascertain the identity of each customer opening a new account.

According to Brad Bennett, FINRA's Executive Vice President and Chief of Enforcement, in a statement on the fines, "Firms must be vigorous in the testing of their electronic systems to ensure they are operating correctly, including those designed to ensure compliance with critical aspects of the AML rules. While the firms eventually discovered the flaw in their own systems, it took far too long, resulting in hundreds of thousands of accounts to open and often close without the required identification process ever taking place."