The US Securities and Exchange Commission has induced a Miami-based brokerage firm to pay a $1 million penalty to settle charges that it broke America's stringent anti-money laundering rules by allowing foreign entities to buy and sell securities without verifying the identities of the foreign citizens who beneficially owned them.

During SEC visits to ES Financial Services, which is now named Brickell Global Markets, the firm twice failed to provide required books and records identifying certain foreign customers whom they were soliciting directly and providing investment advice. The Bank Secrecy Act 1970 requires all financial institutions to maintain an adequate customer identification program (CIP) to ensure financial institutions know their customers and/or do not become a conduit for money laundering or terrorist financing. An ensuing SEC investigation found that the firm’s CIP failed to obtain and maintain documents to verify the identities of certain non-US customers who traded through a brokerage account opened by a Central American bank affiliated with the firm.

As part of the settlement, ES Financial agreed to employ an independent monitor to review its AML/CIP policies, procedures and practices for the next two years. No actual money-laundering occurred. According to the SEC’s order which instituted a settled administrative proceeding, ES Financial allowed 13 non-US corporate entities and, in turn, 23 non-US citizens who were their beneficial owners, to execute more than $23 million in securities transactions through the Central American bank’s brokerage account. ES Financial worked directly with these wealthy foreigners as though they were its own customers but did not collect, verify, or keep documents of any information regarding their identities that was required by law.

The SEC says that ES Financial (which makes no admission at all) willfully broke s17(a) Securities Exchange Act 1934 and Rule 17a-8, which require a broker-dealer to comply with the reporting, recordkeeping, and record retention requirements in regulations implemented under the Bank Secrecy Act, including the requirements in the CIP rule applicable to broker-dealers. The order also finds that the firm willfully broke Exchange Act Rules 17a-3 and 17a-4 which require broker-dealers to create and maintain customer account records and hand them over to SEC representatives upon request.