EFG Capital International has agreed to pay a fine of $650,000 as a part of a settlement with the Financial Industry Regulatory Authority (FINRA).

From 2018 through 2021, EFG’s customers, some of whom the firm designates as high-risk based on their geographic location or other factors, sent and received approximately $5.5 billion in wire transfers, including transfers involving jurisdictions that EFG designated as having a high-risk of money laundering.

The firm’s AML policies and procedures required the firm to monitor those wire transfers for potentially suspicious activity, including for activity involving high-risk geographic locations and transfers that are unexplained, unusually large or show unusual patterns.

EFG, however, failed to establish and implement policies and procedures that could be reasonably expected to detect and cause the reporting of suspicious wire transfers in four respects.

First, from May 2018 through November 2021, the firm did not monitor approximately 900 wire transfers totaling $305 million for suspicious activity, including transfers sent to or from countries that the firm designated as high-risk, because these transfers were not timely uploaded to the firm’s automated AML monitoring tool.

After the firm’s 2018 AWC, the firm began using its automated AML monitoring tool to review wire transfers for firm customers who custodied their account assets with one of the firm’ s bank affiliates.

However, as a result of data transmission delays between those bank affiliates and the firm, information relating to the approximately 900 wire transfers was not transmitted to the firm’s automated AML monitoring tool until after the tool had already performed its analysis of that day’ s wire activity. Accordingly, the AML monitoring tool was not able to surveil or generate alerts on these wire transfers.

During this same time period, EFG did not perform any validation to ensure that its automated AML monitoring tool was timely capturing all wire transfers. EFG detected the delays in late 2021 when responding to FINRA information requests, and in January 2022, took corrective action.

Second, from January 2020 to August 2022, an alert within the firm’s automated AML monitoring tool designed to analyze customer wire transfers of $100,000 or more sent to or received from a jurisdiction that the firm designated as high-risk did not function as designed. These wire transfers were “red flags” under the firm’s AML policy. When such transactions were identified by this alert, the firm was required to evaluate them and consider them for further investigation, but because the alert was not functioning, the firm did not reasonably monitor these wire transfers as required under the firm’ s AML policy.

EFG used country codes connected to wire transfers to trigger the high-risk jurisdiction- related alerts. In January 2020, due to a coding error, country codes for high-risk jurisdictions defaulted to the code for the United States. Thus, a transfer sent to or from a high-risk jurisdiction would appear in the firm’s AML monitoring tool as if it were a transfer to or from the United States. As a result, from January 2020 until August 2022, this tool within the firm’s automated AML monitoring system did not trigger any alerts, which impacted wire transfers totaling approximately $30 million.

Third, from January 2019 to December 2021, the firm failed to reasonably perform certain periodic account reviews that were a component of its AML program for monitoring and reporting suspicious transactions.

The firm did not reasonably, consistently, and timely complete certain periodic reviews. The delays in performing these periodic reviews impacted the firm’s AML monitoring because, in the absence of an alert, the customer’s activity would not have been reviewed timely to confirm that it met the firm’s expectations for the account. It also potentially impacted the monetary thresholds used to flag activity within the firm’s AML monitoring tool, including for alerts related to wire transfers, because those thresholds were based on a customer’s risk rating.

Fourth, during the relevant period, the firm failed to perform AML-related investigations of instances where other financial institutions rejected wire transfers transmitted by EFG customers for compliance reasons, including for customers that EFG designated as high-risk.

As a result, EFG violated FINRA Rules 3310(a) and 2010.

On top of the $650,000 fine, the firm has agreed to a censure.