FINRA fines Aegis Investments for deficient AML program testing

Aegis Investments has agreed to a fine as a part of a settlement with FINRA.

Aegis Investments failed to conduct annual independent testing of the firm’s anti-money laundering (AML) compliance program between 2011 and 2020, in violation of FINRA Rules 3310(c) and 2010.

FINRA Rule 3310 requires member firms like Aegis Investments to develop and implement an AML compliance program reasonably designed to achieve and monitor the firm’s compliance with the Bank Secrecy Act and its regulations. F1NRA Rule 3310(c) directs member firms to conduct “annual (on a calendar-year basis) independent testing” to review and assess the adequacy and level of their compliance with the AML compliance program.

Member firms may have internal personnel or a qualified outside party conduct this test, but the rule prohibits (1) the firm’s designated AML compliance person, (2) firm personnel who perform the AML functions being tested, or (3) any person who reports to these individuals from conducting the annual testing.

Although Aegis Investments conducted quarterly testing of its AML compliance program between 2011 and 2020, the test was performed by a registered representative who was supervised by, and reported to, the firm’s AML Compliance Officer and therefore was not “independent” as required by FINRA Rule 3310(c).

Because the testing focused on reviewing transactions for unusual activity and did not evaluate the firm’s written AML procedures or compliance program, Aegis Investments also failed to conduct a risk-based review of its AML program and its compliance with the Bank Secrecy Act.

Aegis has agreed to a censure and a $7,500 fine.