FinCEN Hits Canaccord With Record $80m AML Penalty

The Financial Crimes Enforcement Network (FinCEN) has imposed an $80m civil money penalty on broker-dealer Canaccord Genuity LLC for willful violations of the Bank Secrecy Act (BSA), marking the largest enforcement action ever taken against a broker-dealer under the anti-money laundering (AML) framework.

According to the U.S Department of the Treasury, Canaccord failed to implement and maintain an effective AML programme, conduct appropriate customer due diligence (CDD), and report suspicious activity as required under the BSA. The enforcement action follows findings that the firm’s compliance weaknesses allowed securities fraud schemes and other suspicious trading activity to go undetected and unreported for years.

FinCEN said the firm failed to file at least 160 suspicious activity reports (SARs) linked to dozens of over-the-counter securities involving thousands of suspicious transactions. Regulators stated that these failures deprived law enforcement of critical financial intelligence needed to investigate and disrupt potential securities fraud and other illicit financial activity.

The regulator also found serious deficiencies in Canaccord’s risk management and customer onboarding controls. The firm admitted that it did not adequately assess or monitor high-risk customers, including individuals later linked to microcap fraud schemes, alleged Russian oligarch money movements, and investigations tied to a Venezuelan individual designated by the Office of Foreign Assets Control (OFAC).

FinCEN said the firm’s AML programme was significantly under-resourced relative to the risks associated with its market making activities. Surveillance systems were poorly designed and operated by inexperienced and insufficiently trained staff who were overwhelmed by the volume of transactions requiring review. As a result, potential red flags linked to securities fraud, including penny stock manipulation schemes, were not effectively investigated or escalated.

The enforcement action also highlights failures by the firm to address compliance issues previously identified by regulators. Supervisory examinations had repeatedly flagged weaknesses in Canaccord’s AML controls and transaction monitoring processes. Although the firm committed to remediation, FinCEN found that meaningful corrective action was delayed until after the agency launched its investigation.

FinCEN stated that broker-dealers must maintain risk-based AML programmes that are proportionate to the scale and complexity of their operations. Institutions operating as market makers in securities markets are particularly expected to detect and report suspicious trading patterns and other red flags linked to fraud and market manipulation.

The case was investigated in cooperation with the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), underscoring increasing regulatory scrutiny of AML controls within the securities sector. FinCEN said the penalty should serve as a warning that financial institutions accessing U.S capital markets must meet their obligations to detect and report illicit financial activity or face significant enforcement consequences.

Read the press release here.