Canaccord Fined $80 Million for Not Reporting Suspicious Trades in 2019-2022

Canaccord Genuity faces an $80 million fine, the largest ever for a broker-dealer's AML failures. This is a huge penalty for not watching suspicious money moves.
By Newsroom | Finance, Regulation |

Regulators Levy $80 Million Penalty for Failure to Monitor and Report Suspicious Trades

A staggering $80 million in penalties has been assessed against Canaccord Genuity LLC by a consortium of U.S. financial regulators. The firm faces accusations of a systemic failure to implement an adequate anti-money laundering (AML) surveillance program. Specifically, the accusations center on a significant number of unfiled 'Suspicious Activity Reports' (SARs), a critical mechanism for flagging potentially illicit financial maneuvers.

A Pattern of Non-Compliance

The core of the regulatory action, involving the Securities and Exchange Commission (SEC), the Financial Crimes Enforcement Network (FinCEN), and the Financial Industry Regulatory Authority (FINRA), points to a period between February 2019 and March 2022. During this timeframe, Canaccord allegedly neglected to file approximately 150 to 160 SARs. These reports were meant to cover trading activity in the over-the-counter (OTC) market, particularly for securities priced below $5.

The SEC's order detailed that Canaccord's AML program was built on what were described as "inadequately designed exception reports." Furthermore, there are allegations that personnel within the firm not only failed to review activity flagged by these reports but also falsified documentation to mask these oversights.

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Scope of the Allegations

FinCEN, in its announcement, characterized the penalty as the largest ever levied against a broker-dealer for Bank Secrecy Act (BSA) violations. The investigation highlighted a particular account linked to a Cyprus-based firm that was purportedly involved in moving money out of Russia for oligarchs.

Investigators also brought forth claims that two compliance employees falsified records to create the appearance of proper trade surveillance review. This, regulators suggest, deprived law enforcement of timely and crucial information concerning suspect financial movements. Canaccord’s regulator had, according to FinCEN, repeatedly identified weaknesses in the firm's AML program, specifically concerning the monitoring of suspicious transactions.

Resolution and Admission

Canaccord Genuity has agreed to the penalty without admitting or denying the specific charges. However, as part of its resolution with FinCEN, the firm admits to willfully violating the BSA. This admission encompasses failures in developing and maintaining an effective AML program, conducting required due diligence on correspondent accounts for foreign financial institutions, and filing SARs. The penalty will be distributed among the U.S. Treasury Department, the SEC, and FINRA.

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Background

The Bank Secrecy Act (BSA) is a foundational piece of U.S. legislation aimed at preventing money laundering and other financial crimes. It mandates that financial institutions implement programs to detect and report suspicious activities. Failure to comply can result in substantial penalties and sanctions. The FinCEN Whistleblower Incentive Program encourages individuals to report violations of the BSA and certain national security laws by offering financial rewards.

Frequently Asked Questions

Q: Why was Canaccord Genuity fined $80 million by US regulators?
Canaccord Genuity was fined $80 million because it failed to have a good system for watching and reporting suspicious money trades. Regulators said the company did not file many required reports about these trades between February 2019 and March 2022.
Q: What specific failures led to Canaccord's large fine?
The company did not file about 150 to 160 Suspicious Activity Reports (SARs) for trades, especially for cheap stocks. Regulators also found that some staff may have faked records to hide that they were not checking the trades properly.
Q: Who are the regulators that fined Canaccord and what did they say?
The Securities and Exchange Commission (SEC), the Financial Crimes Enforcement Network (FinCEN), and the Financial Industry Regulatory Authority (FINRA) issued the fine. FinCEN called it the biggest fine ever for a broker-dealer breaking rules about watching for money laundering.
Q: Did Canaccord admit to the charges when agreeing to the fine?
Canaccord Genuity agreed to pay the $80 million fine but did not admit or deny the specific charges. However, the company did admit to breaking the Bank Secrecy Act rules, which means they failed to create and use a proper system to fight money laundering.
Q: How will the $80 million fine be used?
The $80 million penalty will be shared among different parts of the U.S. government. This includes the U.S. Treasury Department, the SEC, and FINRA, which are the bodies that oversee financial markets and enforce these rules.