Securities Law Blog

AIS Financial, Inc. has been expelled by a Financial Industry Regulatory Authority (FINRA) hearing panel for failing to implement and enforce an anti-money laundering (AML) program. The Westlake Village, California broker-dealer reportedly turned a blind eye to suspicious activity and concealed the activity from regulators, and in return received large commissions.

The FINRA panel found that AIS failed to identify, investigate and report suspicious penny stock activity in three instances from November 2005 to December 2007. In one instance, the firm permitted two accounts controlled by a money management firm based in Costa Rica to deposit and liquidate billions of shares of penny stocks of numerous issuers, generating more than $53,000 in commissions for the firm. The owner of the Costa Rican firm had previously been the subject of regulatory actions by the Securities and Exchange Commission (SEC) for securities fraud.

In another occurrence, AID permitted five accounts to deposit and liquidate penny stocks just two months after the SEC had charged them with securities fraud. The customer and his nephew both had disciplinary histories and criminal indictments for engaging in organized criminal activity and money laundering prior to opening accounts at AIS.

The hearing panel also found that approximately 20 customers were permitted by AIS to deposit and liquidate 65 million shares of Asia Global Holdings Corp. stock (AAGH). Among the red flags on these transactions were suspicious new account forms for customers. The sales generated commissions of $234,304 for the firm.