Industrial and Commercial Bank of China Financial Services (ICBCFS), the US subsidiary of Industrial and Commercial Bank of China, has been fined by the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) for failing to monitor suspicious transactions.
FINRA fined the bank $5.3m, alleging that it lacked an effective anti-money laundering programme to detect suspicious transactions, mainly those involving penny stocks, or reasonably investigate red flags.
The watchdog said that ICBCFS started clearing and settling equity transactions since 2012. The company cleared and settled 33 billion of penny stock shares between January 2013 and September 2015, FINRA said.
FINRA executive vice president of department of enforcement Susan Schroeder said: “Member firms are obligated to implement an AML program that is reasonably designed to address the unique money laundering risks posed by their business. Firms that engage in high-risk activities such as penny stock clearing are the gatekeepers to the market and must establish a reasonable supervisory system to detect and report suspicious trading activity.”
SEC fined ICBCFS $860,000, alleging that the company failed to report suspicious sales of penny stock shares worth billions even after warning signs. The regulator also accused the bank of financial record-keeping and operational violations.
SEC director of New York Regional Office Marc Berger said: “As gatekeepers to the securities markets, brokerage firms, including clearing firms, must take their anti-money laundering obligations seriously. The failure to file SARs in the face of numerous red flags is unacceptable.”
ICBC agreed to the settlements without admitting or denying the allegations.