Nov 21 A former Merrill Lynch broker who managed
as much as $1 billion has been suspended and fined by Wall
Street's watchdog, in part for violating anti-money laundering
rules by not telling the firm about potentially suspicious funds
transfers involving clients' accounts, according to a
Anil Chaturvedi, who left Bank of America's Merrill Lynch
unit voluntarily in 2011, agreed to an 18-month
suspension from the U.S. securities industry and a $60,000 fine,
according to a Financial Industry Regulatory Authority
settlement posted on the regulator's website this week.
Chaturvedi, who now resides in Switzerland and is employed
by a bank there, did not admit to or deny FINRA's allegations,
according to the settlement on November 18. "The substance of
(the case) was that he didn't report what FINRA regarded as
suspicious activity, but any affirmative wrongdoing related to
money laundering or the like has not been alleged," said Neal
Brickman, a lawyer in New York who represented Chaturvedi.
A Merrill spokesman declined to comment.
FINRA rules require brokerages to have policies and
procedures in place to comply with a federal law aimed at
detecting and curbing money laundering.
Financial services companies have been beefing up their
anti-money laundering programs in recent years to meet
regulators' expectations, said Aaron Kahler, director of
anti-money laundering compliance services for a U.S.-based unit
of Capgemini, a Paris-based global consulting firm.
Firms are concerned about the potential for crushing fines,
such as the record $1.9 billion fine this year against banking
group HSBC to resolve charges that it allowed drug cartels to
move vast sums of money from the bank in Mexico. Regulators
expect to see "cutting edge" programs from the largest
brokerages and banks, Kahler said.
Those more rigorous efforts can ultimately cause problems
for brokers who look away from questionable transactions, Kahler
said. "More situations will be traced back to the gatekeepers of
the clients," he said.
Chaturvedi, a 17-year veteran of Merrill Lynch, managed 300
accounts with assets totaling between about $500 million to $1
billion, according to FINRA. His customers, mostly Indian
nationals who resided in India and the United States, included
prominent business people, doctors and other professionals,
Chaturvedi helped clients set up off-shore trust accounts
under corporate names, or confidential "numbered accounts" that
did not reveal their names and addresses. Such strategies can be
red flags for possible money laundering and tax avoidance,
compliance professionals say.
The conduct, which occurred between 2001 and 2009, also
involved falsifying documents, according to FINRA. In 2001,
Chaturvedi set up a $2-million offshore trust for a professor
who lived in India, according to FINRA. The professor died in
2002, but in 2003, Chaturvedi completed paperwork about the
trust account for Merrill's anti-money laundering program,
suggesting that he was in touch with the professor, FINRA said.
FINRA says Chaturvedi learned in 2009 that the original
$2-million in trust funds came from the professor's nephew, who
told Chaturvedi that he wanted to shield it from U.S. tax
liabilities. Chaturvedi did not report that information to the
U.S. Internal Revenue Service until two years later, after the
nephew complained to Merrill about Chaturvedi's handling of the
account, FINRA said. Chaturvedi did not report it to Merrill
Lynch, FINRA said.
FINRA also uncovered roughly 95 "suspicious transfers of
money" totaling about $8 million among Chaturvedi's clients'
accounts and to third parties. The transfers "should have
raised red flags" as potentially suspicious activity that
Chaturvedi should have reported to Merrill, FINRA said.
Many of the transactions were purportedly for real estate or
to repay loans. The dollar amounts, however, were in round
numbers, which would not be typical in transactions that involve
interest payments, FINRA said.