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Finra hits Scottrade with $600K fine for loose oversight
SRO says online broker lacks adequate procedures on money laundering
By Sara Hansard
November 1, 2009, 6:01 AM EST
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The Financial Industry Regulatory Authority Inc. last week fined Scottrade Inc. $600,000 for failing to have adequate anti-money-laundering procedures in place to detect and report suspicious transactions.
In a statement, Finra noted that as an online brokerage firm that executes more than 150,000 trades daily, Scottrade's business model makes it vulnerable to heightened risks of identity theft, unauthorized access to customer accounts or even money-laundering activities.
The Bank Secrecy Act of 1970 requires brokerage firms to have anti-money-laundering programs tailored to their business models.
“Despite the large volume of online trading at Scottrade, the firm failed to establish any systematic or automated surveillance until 2005,” Finra executive vice president and chief of enforcement Susan Merrill said in the statement. “Then, the automated system the firm implemented remained inadequate be-cause it focused only on suspicious trading that was accompanied by suspicious money movement.”
The company did not admit or deny the allegations but consented to be fined, censured improve its money-laundering policies.
“Scottrade takes this very seriously,” a company spokeswoman said.
“We have made enhancements to our anti-money-laundering program and are glad to have put this matter behind us.”
E-mail Sara Hansard at shansard@investmentnews.com.
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