FINRA Fines Moors & Cabot $125,000 Over AML Monitoring Failures

FINRA Fines Moors & Cabot $125,000 Over AML Monitoring Failures

• A US brokerage firm has been censured and fined after regulators found that its anti money laundering programme was not properly designed to detect and report suspicious transactions, exposing a familiar weakness in financial crime controls: having an AML framework is not the same as having one that works.

The Financial Industry Regulatory Authority, FINRA, has fined Moors & Cabot Inc. $125,000 and censured the firm over AML monitoring and investor disclosure failures. The enforcement action covers weaknesses that lasted several years.

According to the settlement, from January 2020 to May 2024, the firm failed to maintain an AML programme reasonably designed to detect and trigger reporting of suspicious transactions, including certain movements of funds. FINRA also found deficiencies in the firm’s ongoing monitoring of activity that could indicate suspicious behaviour.

The case did not end with AML.

Between June 2020 and March 2023, Moors & Cabot also failed to deliver required Form CRS disclosures to 3,264 retail investors. FINRA said the firm lacked a supervisory system reasonably designed to ensure those disclosures were delivered.

The firm agreed to the $125,000 fine and a formal censure.

Compliance Analysis

The enforcement action is a useful reminder that regulators are looking beyond whether a financial institution has written AML policies. The question is whether those controls are capable of identifying suspicious activity in the firm’s actual business.

For a brokerage, monitoring money movements is particularly important because illicit funds can move through legitimate investment accounts without necessarily looking unusual at first glance.

The case also shows how AML, supervision and customer protection failures can sit alongside each other. A firm may have policies in place but still fail if its systems, procedures and management oversight do not make those policies work in practice.

That distinction is becoming more important as regulators increasingly examine whether firms can demonstrate effective, risk-based monitoring rather than simply produce compliance manuals.

The enforcement action also comes shortly after major US AML actions involving much larger financial institutions. In August, FINRA fined UBS Financial Services $20 million over repeat AML failures involving more than 60,000 foreign currency transactions worth about $10 billion, while FinCEN separately imposed a $125 million penalty.

The message across these cases is straightforward: an AML programme is only as good as the transactions it can actually see and the suspicious activity it can actually identify.