Brown Brothers Fined for Money-Laundering Controls

The Financial Industry Regulatory Authority fined Brown Brothers Harriman & Co. $8 million and suspended and fined one of its former employees $25,000 for allegedly failing to comply with anti-money-laundering rules.

Finra said the investment bank and securities firm failed to have an adequate anti-money-laundering program to monitor and detect suspicious penny stock transactions and didn't investigate suspicious penny stock activity brought to its attention.

The penny stock transactions generated at least $850 million in proceeds for Brown Brothers customers, Finra said.

Brown Brothers has made changes to how it handles low-priced securities and the surveillance of those securities in response to the allegations, the firm said Wednesday.

The transactions cited in Finra's allegations are a small part of the company's overall investor services business and didn't involve its investment management or private banking businesses, Brown Brothers added.

Finra alleges that Brown Brothers made transactions or delivered securities involving at least six billion shares of penny stocks, often for undisclosed customers of foreign banks in known bank secrecy havens, between January 2009 and June 2013. Brown Brothers carried out these transactions despite the lack of verification that the stocks were free trading, Finra said.

Frequently, Brown Brothers didn't know basic information such as the identity of the stock's beneficial owner, how the stock was obtained, and the seller's relationship to the issuer, Finra added.

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