Raymond James (RJF) Settles Anti-Money Laundering Issue

On May 18, Raymond James Financial, Inc. (NYSE:RJF) was slapped with a $17 million fine by the Financial Industry Regulatory Authority (FINRA) on the bank’s “widespread failures” to control money laundering. The financial services firm had failed to notice the illegal activity in client investment accounts and inform the same to government authorities.

Further, the former anti-money laundering compliance officer of Raymond James & Associates – Linda Busby -- was charged $25,000 and suspended for a period of three months.

However, Raymond James and Linda Busby have neither admitted nor denied any allegation.

FINRA leveled charges against the brokerage subsidiary – Raymond James & Associates Inc. -- and investment associate – Raymond James Financial Services Inc. -- who had not taken steps to ensure that its systems and processes conform to the anti-money laundering laws in the 2006 to 2014 phase.

The firms “relied on a patchwork of written procedures and systems across different departments to detect suspicious activity,” FINRA stated. “The end result was that certain ‘red flags’ of potentially suspicious activity went undetected or inadequately investigated.”

Notably, FINRA launched a probe into Raymond James’ operations for oversight failures in the period 2011 to 2014. FINRA has been more severe this time as Raymond James had been once fined $400,000 in Mar 2012 for the same issues.

Accounts of foreign financial institutions were not examined properly by the bank and the same failed to uphold an adequate customer identification program, according to regulators. Raymond James’ spokesman Steve Hollister commented that the firm has worked on improving its money-laundering control program which also included the employment of highly proficient staff.

"We will continue to refine our program to address evolving regulatory expectations and ensure we are doing our part to reduce criminality in the financial system," Hollister said.

Bottom Line

We believe that such settlements mitigate legacy issues for the company. We are also encouraged by the bank’s efforts toward gradually resolving such legal overhangs. Raymond James currently sports a Zacks Rank #1 (Strong Buy).

Other companies worth considering include KCG Holdings, Inc. (NYSE:KCG) , LPL Financial Holdings Inc. (NASDAQ:LPLA) and Enterprise Financial Services Corp. (NASDAQ:EFSC) . All three companies sport a Zacks Rank #1.

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