FINRA imposes $15m fine on BNP Paribas over AML program and supervisory failures

Maria Nikolova

From February 2013 to March 2017, BNP did not develop and implement a written AML program that could reasonably be expected to detect and cause the reporting of potentially suspicious transactions.

The United States Financial Industry Regulatory Authority (FINRA) today announces the imposition of a $15 million fine on BNP Paribas Securities Corp. and BNP Paribas Prime Brokerage, Inc. The penalty is a part of a settlement, which concerns BNP’s anti-money laundering (AML) program and supervisory failures involving penny stock deposits and resales, and wire transfers, that spanned four years.

FINRA found that from February 2013 to March 2017, despite its penny stock activity, BNP did not develop and implement a written AML program that could reasonably be expected to detect and cause the reporting of potentially suspicious transactions. Until 2016, BNP’s AML program did not include any surveillance targeting potential suspicious transactions involving penny stocks, although BNP accepted the deposit of nearly 31 billion shares of penny stocks, worth hundreds of millions of dollars, from its clients, including from so-called “toxic debt financiers.”

Furthermore, BNP did not implement any supervisory systems or written procedures to determine whether resales of securities, including the penny stocks deposited by its customers, complied with the registration requirements of Section 5 of the Securities Act of 1933. Due to this, BNP facilitated the removal of restrictive legends from approximately $12.5 million worth of penny stocks without any review to evaluate the transactions for compliance with Section 5.

During the relevant period, BNP processed over 70,000 wire transfers with a total value of more than $230 billion, including more than $2.5 billion sent in foreign currencies. BNP’s AML program did not include any review of wire transfers conducted in foreign currencies, and did not review wires conducted in U.S. dollars to determine whether they involved high-risk entities or jurisdictions.

FINRA has also found that BNP’s AML program was understaffed. For instance, even though BNP effected more than 70,000 wire transfers during a two-year period, with a total value of $233 billion, during a majority of that period, only one investigator was tasked with reviewing alerts relating to wires originating from BNP’s brokerage accounts. Although BNP identified many of these deficiencies as early as January 2014, BNP did not fully revise its AML program until March 2017. As a result, BNP did not identify “red flags” indicative of—or review—potentially suspicious activity involving the deposit and sales of penny stocks or foreign wire transfers that may have required the filing of a suspicious activity report.

In settling this matter, BNP neither admitted nor denied the charges, but consented to the entry of FINRA’s findings. On top of the fine, BNP has agreed to certify within 90 days that its procedures are reasonably designed to achieve compliance in these areas.

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