According to FINRA, Velox Clearing LLC was censured, fined $1,300,000, and required to comply with certain undertakings for serious failures in its anti-money laundering (AML) program and business communications recordkeeping.

The firm's AML program was not reasonably designed to address its high-risk customer base and their trading in volatile low-priced securities. Until January 2023, the firm's AML procedures were not customized to its business at all. While the procedures mentioned using exception reports to monitor for suspicious trading, they failed to describe what reports would be used or how they would be reviewed to identify red flags.

The firm also failed to commit adequate staff and resources to its AML program, cycling through eight different AML Compliance Officers with no additional support staff. These officers were burdened with other compliance and operational tasks that prevented them from adequately monitoring trading activity. As a result, the firm failed to detect numerous red flags of potentially suspicious trading including indicators of spoofing, layering, bid support, and marking the close.

Compounding these issues, the firm failed to preserve or supervise employees' use of off-channel business communications. Despite written procedures prohibiting unapproved communication platforms, firm personnel, including the CEO and operations staff, routinely used unapproved text messaging and social media platforms for business communications with clients. These communications included discussions about customer accounts, trading, and order placement. Even after compliance staff instructed employees to cease using unapproved platforms, firm personnel continued to do so with senior management's knowledge. This resulted in over 10,000 off-channel communications going unreviewed and unretained.

The firm also failed to properly supervise and document associated persons' outside brokerage accounts. This case represents a comprehensive failure to maintain the compliance infrastructure necessary to protect investors and market integrity.