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Citi brokerage subsidiary hit with $5.75M FINRA fine for lax anti-money laundering program

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FINRA has slammed Citi International Financial Services with a $5.75 million fine for failing to have an adequate anti-money laundering program in place.

The regulator claimed the firm processed a number of securities transactions that facilitated conversions of foreign currency from or into U.S. dollars, which elevated money laundering risk, it said. The transactions involved the use of American depositary receipts or certificates issued by U.S. banks representing shares in foreign stocks traded on U.S. exchanges as well as large volumes on non-U.S. debt securities.
FINRA reprimanded the firm for processing more than one thousand non-U.S. securities transactions with an aggregate value of approximately $380 million from January 2011 to July 2013.

Citi International, which is headquartered in Puerto Rico, serves non-U.S. customers residing primarily in Latin America, a region generally considered to present heightened money-laundering risk, FINRA said.

"Given the volume and nature of transactions processed by CIFS, as well as the particular risks associated with its business model, CIFS lacked an adequate system to monitor transactions for purposes of detecting potentially suspicious activity and evaluating whether transactions should be elevated for closer AML scrutiny and potential reporting," FINRA wrote in its settlement.

Danielle Romero-Apsilos, a spokeswoman for Citi International, said the firm was happy to have settled the disciplinary action. "We are pleased to have this matter from 2013 resolved and we continue to improve, manage and monitor our AML efforts," she said.

In its settlement, Citi International neither admitted nor denied the charges but consented to an entry of FINRA's findings.

FINRA chided the firm for not tailoring its anti-money laundering program to fit the nature of it business. Until at least July 2013, the firm relied primarily on manual supervisory review of customer securities transactions to identify operational and compliance concerns, the regulator said.

FINRA also chastised the firm for not conducting adequate annual independent testing of its program, as required by FINRA rules.

In addition to the $5.75 million fine, the firm was ordered to develop and implement written policies, procedures and internal controls designed to address the shortcomings of the program within 180 days.

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