By Suzanne Barlyn
REUTERS - 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 settlement.
Anil Chaturvedi, who left Bank of America's Merrill Lynch unit
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, FINRA said.
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. (Reporting by Suzanne Barlyn; Editing by Linda Stern and Dan Grebler)