Score Priority Corp.

Score Priority Corp. was fined $250,000 and required to retain an independent consultant to conduct a comprehensive review of the reasonableness of the firm’s policies, systems, procedures and training for failing to establish and implement an AML program that could reasonably be expected to detect and cause the reporting of suspicious transactions.

The findings stated that the firm lacked reasonable written AML procedures for surveillance of potentially suspicious trading and money movements in customer accounts. Although the firm’s written procedures required the use and review of exception reports to assist with the identification of red flags for suspicious trading and suspicious money movements, they did not identify any exception reports that the firm would use and did not describe how the supervisors should use them.

The firm’s written procedures stated that the firm would perform additional monitoring of accounts in which suspicious trading was identified but did not describe steps for performing that monitoring or state how often the monitoring should occur.

The written procedures also required that the firm periodically monitor transaction activity in foreign accounts but did not describe the frequency or the manner in which such monitoring should occur.

In addition, the firm relied almost exclusively on a manual review of the daily trade blotter to identify suspicious trading, even though it did not reflect patterns of trading across accounts or across multiple days. The firm did not regularly use any exception reports or automated tools to monitor customer transactions for suspicious activity. This manual review was also unreasonable given the volume and complexity of the trading by the firm’s customers.

Although the firm implemented an automated surveillance system from a third-party vendor, it failed to timely review some alerts generated by the new system.

In addition, the firm did not identify accounts that had high levels of money movements with very low levels of securities transactions.

Furthermore, the firm had a practice of failing to reasonably respond to AML red flags. The firm’s practice was to observe whether suspicious trading continued over a period of weeks or months, rather than timely consider filing a Suspicious Activity Report (SAR).

Additionally, the firm’s AML procedure did not contain any procedures about documenting any analysis or records regarding the investigation of potentially suspicious activity and the firm did not document the findings of its investigations.

The findings also stated that the firm failed to establish and implement a reasonable customer identification program with regard to foreign retail customers and failed to conduct due diligence on foreign financial institutions. The firm’s procedures did not describe the methods the firm would use to verify the information provided by its customers, including its foreign customers. The firm’s procedures also failed to describe the documents required to be collected from the firm’s foreign customers, or how the firm would address red flags during the account opening process.

The firm’s AML procedures stated that specific enhanced due diligence and scrutiny must be applied to correspondent accounts for certain foreign financial institutions, but failed to describe the due diligence or scrutiny required.