SEC Settles With Miami Firm Over Anti-Money Laundering Protocols

The U.S. Securities and Exchange Commission (SEC) recently announced that a Miami-based brokerage firm has agreed to pay a $1 million penalty to settle charges that it violated anti-money laundering rules by allowing foreign entities to buy and sell securities without verifying the identities of the non-U.S. citizens who beneficially owned them.

During SEC examinations of E.S. Financial Services, which is now named Brickell Global Markets, the firm on two occasions failed to provide required books and records identifying certain foreign customers whom they were soliciting directly and providing investment advice.

Federal law requires all financial institutions to maintain an adequate customer identification program (CIP) to ensure financial institutions know their customers and do not become a conduit for money laundering or terrorist financing.

An ensuing SEC investigation found that E.S. Financial’s CIP failed to obtain and maintain documentation to verify the identities of certain non-U.S. customers who traded through a brokerage account opened by a Central American bank affiliated with the firm.
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According to the SEC:

• During approximately a decade, E.S. Financial maintained a brokerage account for a Central American bank that was purportedly trading for its sole benefit.
• E.S. Financial allowed 13 non-U.S. corporate entities and, in turn, 23 non-U.S. citizens who were their beneficial owners, to execute more than $23 million in securities transactions through the Central American bank’s brokerage account.
• E.S. Financial worked directly with these non-U.S. citizens as if they were E.S. Financial customers, but did not collect, verify, or document any information regarding their identities as required under anti-money laundering/CIP regulations.

Eric Bustillo, director of the SEC’s Miami Regional Office, commented:

While no fraud occurred in this instance, our investigation found there were significant holes in the framework of E.S. Financial’s CIP that left the firm susceptible to illegal activity by customers who were not fully known. Firms must stick to the CIP rules that require a broker-dealer to establish, document.

Also as part of the settlement, the brokerage firm agreed to retain an independent monitor to directly review its anti-money laundering/CIP policies, procedures and practices for the next two years.