FINRA fines SageTrader for AML program implementation deficiencies
SageTrader, LLC has agreed to pay a fine of $100,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).
From April 2016 through December 2019, SageTrader did not tailor its anti-money laundering (AML) program to reasonably monitor for and report suspicious activity in light of the firm’s business model and customer base. SageTrader’s system for detecting and causing the reporting of suspicious activity was predicated on its review of alerts generated by its automated third-party surveillance system.
The firm’s AML program directed all alerts to one individual compliance officer at the firm. The firm’s AML program relied on the one compliance officer to then determine whether alerts were “valid,” i.e., indicative of suspicious or potentially manipulative activity. If so, the compliance officer would escalate the alerts to the firm’s alert review committee, which met weekly, to review the alerts and consider further action.
The compliance officer designated by the firm’s AML program to review the alerts had no prior AML supervisory experience or training and the firm’s written AML procedures and training materials did not provide reasonable guidance for determining whether the alerts required follow-up or could be disregarded. The firm failed to provide any guidance for determining whether the firm should file a SAR based on the alerts.
The firm’s failure to develop a reasonable written AML program resulted in the firm creating a series of unwritten policies for addressing and escalating surveillance alerts. The firm generally considered filing a SAR when at least three valid alerts involved a single trader. As a result, the firm did not typically consider filing a SAR if there were less than three valid alerts involving a single trader that were indicative of a pattern of potentially suspicious or manipulative activity.
This policy, in combination with a series of policies that the firm created for addressing and escalating surveillance alerts, resulted in the firm failing to reasonably consider whether a particular alert warranted the filing of an SAR.
On top of the fine, the respondent consents to the imposition of a censure.