EFG Capital International Corp. – Failure to Supervise – South Florida, including Boca Raton, Lake Worth, Deerfield Beach, Boynton Beach and West Palm Beach, FINRA Arbitration Attorney
EFG Capital International Corp. (CRD #40118, Miami, Florida)
Recently, the Financial Industry Regulatory Authority announced that EFG Capital International Corp. entered into an Acceptance, Waiver and Consent in which the firm was censured, fined $800,000 and required to adopt and implement supervisory systems and written procedures reasonably designed to achieve compliance with the requirements of FINRA Rule 3110. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to establish and implement an adequate supervisory system, including WSPs, or anti-money laundering (AML) program related to two material areas of its international business model. The findings stated that the firm did not adequately assess, supervise or mitigate the business risks associated with its payment of transaction-based compensation to non-registered individuals or entities, and potentially suspicious outgoing wire transfer activity occurring in accounts of dual customers of the firm and its Swiss bank affiliate. The findings also stated that as part of its international business model, the firm entered into transaction referral agreements under which a foreign individual or entity, called a “foreign introducer,” referred specific transactions to the firm in exchange for a percentage of the firm’s mark-up or commission on the referred transactions. However, the firm’s supervisory system was unreasonable because it failed to assess whether it had sufficient information about the foreign introducer, or its ability to legally satisfy its obligations under an agreement, to conclude that the firm’s payment of transaction-based compensation to the foreign introducer was permissible under U.S. law.
In addition, the firm failed to follow its own WSPs regarding the referral agreement. Importantly, the firm failed to identify several red flags related to the ownership of the foreign introducer and failed to follow-up on red flags regarding the unexpectedly large number and size of the referred transactions. The findings also included that the firm’s AML system and procedures did not identify whether the foreign introducers with which it did business were high-risk entities or engaged in high-risk activities and did not adequately review the foreign introducer’s referred transactions or wire transactions for red flags and patterns of suspicious activity. Separately, many of the firm’s high net worth customers were dual customers of the firm and its Swiss bank affiliate, where all of these customers’ money movement activity occurred and the activity was subjected to automated monitoring for Swiss AML purposes. The firm typically had operational involvement in outgoing money movements entered into by these customers and reviewed such transactions at the time they were made for potential AML red flags. However, the firm’s overall AML program was insufficient to identify and investigate potentially suspicious patterns of outgoing wire transfer activity in the Swiss bank accounts of the firm’s dual customers that should have raised AML red flags requiring further investigation by it and potentially the filing of suspicious activity reports. (FINRA Case #2015046020002). In order to review the entire AWC, click on the following link: EFG Captial International Corp. AWC.pdf
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