Pinnacle Capital Markets has once again has been slapped with a fine for inadequate anti-money laundering and customer identification procedures involving foreign investors using its direct market access system.
The Securities and Exchange Commission has fined the Raleigh, N.C. firm $50,000 for failing to comply with federal anti-money laundering rules from 2003 to 2009 that require broker-dealers such as Pinnacle to identify and verify the identities of their customers. The company was also charged with not providing employees with enough training to spot and report suspicious activities.
“Left unchecked, Pinnacle’s business model yields significant money laundering risks,” said Robert Khuzami, director of the SEC’s Division of Enforcement. “If a broker-dealer provides customers with direct access to the U.S. securities markets, it must comply with the applicable customer identification rules.”
Without admitting or denying guilt, Pinnacle agreed to improve its procedures and will make two payments of $25,000 each to the U.S. Treasury. Company officials declined to comment.
As reported by Securities Technology Monitor, on Feb. 2 the Financial Industry Regulatory Authority (FINRA) also fined Pinnacle for inadequate procedures which allowed foreign investors unfiltered access to U.S. markets from January 2006 to September 2009.
Launched in 2002, Pinnacle provides software over the Internet that gives customers direct access to execute trades on stock markets such as the New York Stock Exchange. About 99 percent of its customers are located outside the U.S., according to the SEC. Foreign financial institutions can open omnibus sub-accounts for foreign customers who can then trade using Pinnacle’s system without fully disclosing their identities. Unless Pinnacle checks who those customers are it runs the risk of terrorist financing or other illegal trading activities.
Although Pinnacle did document an anti-money laundering program in 2004 it never followed its own procedures, said the SEC in a statement explaining its fine. “From October 2003 through August 2006, Pinnacle did not verify the identities of many of its corporate account holders,” said the SEC. ”Further, from October 2003 to November 2009, Pinnacle did not identify or verify the identities of the vast majority of its customers’ omnibus accounts sub-account holders even though the sub-account holders were Pinnacle’s customers for purposes of following [customer identification regulations].”
Register or login for access to this item and much more
All On Wall Street content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access