According to FINRA, Sanctuary Securities, Inc. has been censured and fined $150,000 for failing to develop and implement an AML program reasonably designed to achieve compliance with the Bank Secrecy Act and its implementing regulations.

The firm received various exception reports from its clearing firm but lacked reasonable written guidance on how to review them. As a result, the firm cleared many transactions identified by reports without reasonably documented evaluation of whether they raised red flags of suspicious activity.

The firm also failed to establish appropriate risk-based procedures for conducting ongoing customer due diligence, including understanding the nature and purpose of customer relationships to develop customer risk profiles. Additionally, the firm's Customer Identification Program was deficient - while procedures required collecting name, date of birth, and address, they did not require collecting identification numbers from new customers, did not provide reasonable procedures for identity verification, and did not address how to respond when the firm couldn't form a reasonable belief about a customer's true identity.

Furthermore, while the firm retained an outside consultant to conduct independent AML testing, that test failed to address material aspects of the firm's AML program.

For investors, this case highlights the importance of due diligence procedures at brokerage firms. AML programs exist not just to prevent financial crime, but also to protect customers from fraud and identity theft. When firms fail to properly verify customer identities and monitor for suspicious activity, they create vulnerabilities that can harm legitimate customers.

The case also demonstrates that simply hiring an outside consultant is not sufficient - the testing must be comprehensive and address all material aspects of the AML program.