FINRA Fines EFG $650K for Repeated Anti-Money Laundering Failures

The Financial Industry Regulatory Authority has fined Miami-based full-service brokerage firm EFG Capital International and issued a censure for persistent failures in its anti-money laundering, or AML, compliance program.

FINRA Rule 3310 requires member firms to develop and implement a written AML program reasonably designed to achieve compliance with the Bank Secrecy Act and its implementing regulations, specifically requiring the detection and reporting of suspicious transactions. A violation of this rule also constitutes a violation of FINRA Rule 2010, which requires firms to observe high standards of commercial honor and just and equitable principles of trade.

The $650,000 fine is the second major penalty for AML deficiencies the firm has faced in recent years. In May 2018, EFG was fined $800,000 for similar violations occurring between 2010 and 2015.

The latest enforcement action covers a period from May 2018 to August 2022, during which EFG’s customers moved approximately $5.5 billion in wire transfers, including transactions involving jurisdictions designated by the firm as high-risk for money laundering.

FINRA’s investigation, which stemmed from a cycle examination of the firm, identified four primary areas where EFG’s AML program failed to function as required:

1. Between May 2018 and November 2021, the firm failed to monitor approximately 900 wire transfers totaling $305 million for suspicious activity. This happened because of data transmission delays from the firm’s bank affiliates, causing the wire data to reach EFG’s automated AML monitoring tool only afterthe daily analysis had already run. The firm also failed to perform timely validation to ensure its monitoring tool was capturing all wire transfers.
2. From January 2020 to August 2022, an alert designed to flag customer wire transfers of $100,000 or more sent to or received from high-risk jurisdictions failed to operate correctly. A coding error caused country codes for high-risk jurisdictions to default to the code for the United States, preventing the alert from triggering and impacting wire transfers totaling approximately $30 million.3
3. From January 2019 to December 2021, EFG failed to complete certain periodic account reviews that were a component of its AML program. These reviews were crucial for detecting unusual activity that could warrant a suspicious activity report filing and for evaluating customer risk ratings, which set the parameters for the firm’s automated AML monitoring.4
4. During the relevant period, EFG neglected to perform AML-related investigations when other financial institutions rejected wire transfers transmitted by its customers for compliance reasons. This failure included cases involving customers the firm had designated as high-risk.

EFG consented to the censure and fine without admitting or denying the findings, agreeing to pay the $650,000 penalty immediately upon FINRA’s acceptance of the settlement. The firm reported taking corrective action in January 2022 to resolve the data transmission delays and later corrected the high-risk jurisdiction coding error.

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