An irreverent Wall Street Blog
FINRA Fines and Suspends CCO / AMLCO For Structuring
February 15, 2021
In the hustle to pay one's bills, many Wall Streeters (and their customers) have taken on second and third jobs, and are now fully enmeshed in the gig economy. With COVID still at pandemic levels, many employees want to get paid in cash (or ask a local retailer to cash their paycheck) because the local bank branch is closed or under-staffed. By the time folks are able to get to their banks or nearby ATMs, the cash payments have accumulated into a tidy sum, and the deposits are starting to trigger anti-money-laundering issues. A recent pre-pandemic case reminds us of the issues attendant to the so-called "structuring" of under-$10,000 cash deposits.
Case In Point
For the purpose of proposing a settlement of rule violations alleged by the Financial Industry Regulatory Authority ("FINRA"), without admitting or denying the findings, prior to a regulatory hearing, and without an adjudication of any issue, Jamie Bennett submitted a Letter of Acceptance, Waiver and Consent ("AWC"), which FINRA accepted. In the Matter of Jamie Bennett, Respondent (FINRA AWC 2019061763302)
https://www.finra.org/sites/default/files/fda_documents/2019061763302
%20Jamie%20Bennett%20CRD%202740248%20AWC%20jlg.pdf
Bennet as CCO and AMLCO
The AWC alleges that Jamie Bennett was first registered in 2003; and in 2011, he founded former FINRA member firm Silber Bennett Financial, Inc. The AWC asserts that:
[W]hile registered with Silber Bennett Financial, Bennett served in a variety of capacities, including Director, Chief Executive Officer, and Chief Financial Officer. Bennett also acted as his firm's Chief Compliance Officer and Anti-Money Laundering Compliance Officer from June 2017 to March 2019, among other periods.
2019 Prior AWC
The AWC alleges the following under "Relevant Disciplinary History":
On April 30, 2019, FINRA issued a Letter of Acceptance, Waiver and Consent (No. 2015047201702) finding that Bennett, while responsible for the review and retention of email at Silber Bennett Financial, failed to ensure that the firm captured, retained and reviewed emails related to firm business -- specifically: (i) emails sent or received by a firm branch office and (ii) certain business-related emails sent or received by Bennett using a third-party email address. As a result, Bennett violated NASD 3010 (for conduct prior to December 1, 2014), FINRA Rule 3110 (for conduct on or after December 1, 2014), and FINRA Rules 4511 and 2010. In addition, Bennett caused the firm to act in contravention of Section 17(a) of the Securities and Exchange Act of 1934 and Rule 17a4 promulgated thereunder, and therefore violated FINRA Rule 2010. For this misconduct, FINRA suspended Bennett in all capacities for 30 calendar days and fined him $5,000.From September 3, 2019 until October 23, 2020, Bennett was suspended in all capacities, pursuant to FINRA Rule 9552, for failing to timely respond to FINRA requests for information and documents.
2018 - 2019: Structured Deposits
As to the matters at issue in the 2021 AWC, it is alleged in part that:
Between August 2018 and January 2019, Bennett structured his cash deposit and withdrawal activity in amounts below $10,000 using various methods and patterns that included: the use of multiple bank branch locations, multiple accounts, and multiple transactions (either on the same day, consecutive days or within a period of multiple days). Bennett structured 80 cash withdrawals and deposits totaling approximately $170,000, in amounts below $10,000, involving four personal bank accounts at bank branches located in the Los Angeles, California area. Bennett's structured cash withdrawals and deposits did not involve any customer funds.
FINRA Sanctions
In accordance with the terms of the AWC, FINRA found that Bennett intentionally structured cash deposits and withdrawals in increments of less than $10,000 in an attempt to evade the federal reporting requirements and prevent the filing of currency transaction reports ("CTRs"). According, the AWC asserts that Bennett's structuring constituted his failure to observe high standards of commercial honor and just and equitable principles of trade in violation of FINRA Rule 2010; and the self regulator imposed upon him a $10,000 fine and an two-year suspension from associating with any FINRA member in all capacities.
Bill Singer's Comment
I haven't quite figured out the actual "why," but as noted in the opening paragraph of today's blog, in my private practice of law, I have started noticing an increasing number of queries from folks who seem to be running afoul of BSA structuring rules. It may have something to do with COVID and possibly the inability to easily make deposits at a nearby bank branch -- many of which were closed during the pandemic or operating with dramatically reduced staff and hours. Whatever the developing issue, "structuring" seems to be coming into vogue the past few months. As such, let's go back to the old rulebook for a refresher course. Following the enactment in 1970 of the Bank Secrecy Act ("BSA), the Financial Crimes Enforcement Network ("FinCen") was established in 1990. First enacted in 1986, Title 31 of the U.S. Code: "Money and Finance" presently provides under:
Section 5324: "Structuring transactions to evade reporting requirement prohibited":
(a) Domestic Coin and Currency Transactions Involving Financial Institutions.-No person shall, for the purpose of evading the reporting requirements of section 5313(a) or 5325 or any regulation prescribed under any such section, the reporting or recordkeeping requirements imposed by any order issued under section 5326, or the recordkeeping requirements imposed by any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508-
(1) cause or attempt to cause a domestic financial institution to fail to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by an order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508;(2) cause or attempt to cause a domestic financial institution to file a report required under section 5313(a) or 5325 or any regulation prescribed under any such section, to file a report or to maintain a record required by any order issued under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 5326, or to maintain a record required pursuant to any regulation prescribed under section 21 of the Federal Deposit Insurance Act or section 123 of Public Law 91-508, that contains a material omission or misstatement of fact; or(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more domestic financial institutions.
(b) Domestic Coin and Currency Transactions Involving Nonfinancial Trades or Businesses.-No person shall, for the purpose of evading the report requirements of section 5331 or any regulation prescribed under such section-
(1) cause or attempt to cause a nonfinancial trade or business to fail to file a report required under section 5331 or any regulation prescribed under such section;(2) cause or attempt to cause a nonfinancial trade or business to file a report required under section 5331 or any regulation prescribed under such section that contains a material omission or misstatement of fact; or(3) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with 1 or more nonfinancial trades or businesses.
(c) International Monetary Instrument Transactions.-No person shall, for the purpose of evading the reporting requirements of section 5316-
(1) fail to file a report required by section 5316, or cause or attempt to cause a person to fail to file such a report;(2) file or cause or attempt to cause a person to file a report required under section 5316 that contains a material omission or misstatement of fact; or(3) structure or assist in structuring, or attempt to structure or assist in structuring, any importation or exportation of monetary instruments.
(d) Criminal Penalty.-
(1) In general.-Whoever violates this section shall be fined in accordance with title 18, United States Code, imprisoned for not more than 5 years, or both.(2) Enhanced penalty for aggravated cases.-Whoever violates this section while violating another law of the United States or as part of a pattern of any illegal activity involving more than $100,000 in a 12-month period shall be fined twice the amount provided in subsection (b)(3) or (c)(3) (as the case may be) of section 3571 of title 18, United States Code, imprisoned for not more than 10 years, or both.
Section 1010.100: "General definitions":
(xx) Structure (structuring). For purposes of § 1010.314, a person structures a transaction if that person, acting alone, or in conjunction with, or on behalf of, other persons, conducts or attempts to conduct one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading the reporting requirements under §§ 1010.311, 1010.313, 1020.315, 1021.311 and 1021.313 of this chapter. "In any manner" includes, but is not limited to, the breaking down of a single sum of currency exceeding $10,000 into smaller sums, including sums at or below $10,000, or the conduct of a transaction, or series of currency transactions at or below $10,000. The transaction or transactions need not exceed the $10,000 reporting threshold at any single financial institution on any single day in order to constitute structuring within the meaning of this definition.