According to FINRA, The Carney Group, Incorporated was sanctioned for failing to conduct independent testing of its anti-money laundering compliance program. The firm was required to remediate the issues and implement proper supervisory systems, though no monetary sanctions were imposed due to the firm's financial status.

The firm failed to conduct independent testing of its AML program despite receiving previous warnings from FINRA about this requirement. The firm's written AML procedures stated that one of its two registered representatives would conduct AML testing, even though neither individual qualified as independent. One representative was the firm's AML compliance officer, and the other reported to the AML compliance officer. Both were specifically prohibited from conducting independent testing under regulatory requirements.

Independent testing is a critical component of an effective AML compliance program. The requirement exists to ensure that AML procedures are evaluated objectively by someone without conflicts of interest or responsibility for the program being tested. When firms fail to conduct independent testing, vulnerabilities in their AML programs may go undetected, potentially allowing money laundering or other illicit financial activities to occur.

This case illustrates that even small firms with limited staff must comply with AML testing requirements. Firms cannot simply have their AML compliance officer or subordinates test their own programs. Investors should be aware that proper AML compliance helps protect the integrity of the financial system and reduces the risk of firms being used for illegal purposes.