← Broker database 2023-02-07
SageTrader Fined $100,000 for Anti-Money Laundering Program Failures
According to FINRA, SageTrader, LLC was censured and fined $100,000 for failing to establish and implement adequate anti-money laundering policies and procedures to detect and report suspicious activity.
The firm's AML program was not reasonably tailored to its business model and customer base. The entire surveillance system relied on alerts generated by a third-party automated system, with all alerts directed to a single compliance officer who had no prior AML supervisory experience or training. The firm provided inadequate guidance to this officer for determining whether alerts warranted follow-up or could be disregarded, and offered no guidance for determining when to file a Suspicious Activity Report (SAR).
This lack of proper procedures led the firm to develop a series of unwritten policies for handling alerts. Notably, the firm generally would not consider filing a SAR unless there were at least three valid alerts involving a single trader showing a pattern of suspicious activity. This informal threshold, combined with other ad hoc policies, resulted in the firm failing to reasonably consider whether particular alerts warranted SAR filings—potentially allowing suspicious or manipulative trading to go unreported.
Anti-money laundering programs are critical protections in the financial system, designed to detect and prevent criminals from using brokerage accounts to launder proceeds of illegal activity. FINRA Rule 3310 requires firms to develop AML programs tailored to their specific risks and business activities. The program must be reasonably designed to detect and cause the reporting of suspicious transactions.
For investors, robust AML compliance is essential to maintaining the integrity of financial markets. When firms fail to maintain adequate AML programs, they may unknowingly facilitate financial crimes, which can damage market confidence and potentially expose innocent customers to regulatory scrutiny. This case demonstrates the importance of having properly trained compliance personnel, written procedures that provide clear guidance, and supervision systems that are actually designed to identify suspicious activity rather than creating arbitrary thresholds that allow suspicious activity to go unreported.