The importance of adequate and effective Anti-Money Laundering (“AML”) programs should never be underestimated in the current US regulatory environment, as the Financial Industry Regulatory Agency’s (“FINRA’s”) January 28, 2014 announcement of penalties against the firm Banorte-Ixe clearly illustrates. The FINRA news release details the penalties and oversights that led it to fine Banorte-Ixe Securities International, Ltd. $475,000 for AML and registration failures. Subsequently, the firm’s AML Officer and Chief Compliance Officer (“CCO”) Brian Anthony Simmons, was suspended for 30 days in a principal capacity.

While Banorte-Ixe – a New York firm working with Mexican clients who invest in US and other foreign securities – was found to have failed to register “approximately 200 to 400 foreign finders” (to learn more about “finders” please see JLG’s previous blog post here) who worked with the firm’s Mexican clients, their more egregious failure was within the realm of AML. According to the FINRA announcement, Banorte-Ixe’s AML policies were so flawed that the firm did not “detect, investigate or report” the funneling of $28 million in and out of an account opened for a corporate client with ties to a Mexican drug cartel. The AML system in place at Banorte-Ixe could not track “suspicious transactions that involve at least $5,000 in funds or other assets” that should be reported to Financial Crimes Enforcement Network, under the Bank Secrecy Act. Additionally, Banorte-Ixe and Simmons failed to tailor AML policies to consider the “unique risks posed by opening accounts, transferring funds and effecting securities transactions for customers located in Mexico,” a country known for its “high risk money laundering” environment. This case, exemplifies not only the repercussions of a lack of proper AML measures, but also the importance of AML policies that are adequately tailored to the particular needs and services of an investment firm.

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