[Photo:  Roland zh / Wikimedia Commons]

Credit Suisse Securities (USA) agreed to pay a $16.5Mn fine to settle FINRA charges that the firm’s suspicious activity monitoring program was deficient in 2 respects.

• Credit Suisse primarily relied on its registered reps (RR’s) to ID and escalate potentially suspicious trading, including in microcap stock transactions. In practice, however, high-risk activity was not always escalated and investigated, as required.

• Credit Suisse’s automated surveillance system to monitor for potentially suspicious money movements was not properly implemented. A significant portion of the data feeds into the system were missing information or had other issues that compromised the system’s effectiveness. The firm also chose not to utilize certain available scenarios designed to identify common suspicious patterns and activities, and it failed to adequately investigate activity identified by the scenarios that the firm did utilize. 

FINRA Specifics.   For all of 2011, 2012 and most of 2013, Credit Suisse failed to effectively review trading for AML reporting purposes. The firm expected its RRs's, who were the primary contact with the customers, to identify and report to AML Compliance activity or transactions that were unusual or suspicious based on “red flags” described in Credit Suisse’s AML policies - and AML Compliance would then investigate and, where appropriate, file Suspicious Activity Reports (SARs). However:  (i) the systems and procedures used to monitor trading for other purposes were not designed to detect potentially suspicious activity; (ii) other departments and branches did not effectively assume responsibility for reviewing trading for AML reporting purposes; and, (iii) CS failed to account for the fact that most orders it received from its foreign affiliates came in to the firm electronically and thus were not seen by the firm’s sales traders.

From 2011 through 2015, Credit Suisse used an automated surveillance system to identify red flags of potentially suspicious money transfers. Yet, it failed to implement the automated surveillance system properly, including by failing to ensure that the data that was being fed into the system was adequate and by failing to utilize available scenarios that were applicable to the money-laundering risks presented by its business. In addition, Credit Suisse did not have adequate staffing to review the tens of thousands of alerts the automated system generated in any given year. 

From 2011 to 2013, Credit Suisse was deficient in prohibiting the sale of unregistered securities. As a result, during that timeframe, the firm facilitated the illegal distribution of at least 55 million unregistered shares of securities.