According to FINRA, Builder Advisor Group, LLC was censured and fined $30,000 for failing to establish and implement procedures to identify and verify the identities of beneficial owners of its legal entity customers.

The firm failed to obtain certifications for the accuracy of beneficial owner information as required when onboarding new legal entity clients. The firm also failed to record the non-documentary methods it used to verify the identities of some beneficial owners.

Beneficial ownership rules require broker-dealers to identify and verify the identity of individuals who own 25 percent or more of a legal entity customer, as well as an individual who controls the legal entity. These rules are designed to prevent the use of shell companies and other legal entities to conceal the identities of those behind potentially illicit financial activity.

FINRA also found that the firm failed to conduct required independent testing of its anti-money laundering (AML) compliance program. Independent testing is a critical component of an effective AML program, helping to identify weaknesses and ensure that controls are functioning as intended.

This case serves as a reminder that all broker-dealers, regardless of size, must maintain robust AML programs that include proper beneficial ownership procedures and regular independent testing. These requirements help protect the financial system from money laundering and terrorist financing activities.

Investors can take some comfort knowing that regulators actively enforce these requirements to help ensure the integrity of financial markets.