Penalty for compliance failure imposed on E*Trade

$1 million is to be paid by online brokerage E*Trade to settle claims that two of its units failed to comply with US anti-money laundering (AML) regulations without admitting or denying the allegations against the company.

Under the terms of AML rule broker-dealers are required to verify the identities of customers and document the procedures for doing so.

As it is stated by the SEC within the period of October 2003 and June 2005 the brokerage proved incapable to accurately document certain customer identification programme (CIP) practices and verify the identities of 65,442 customers in accordance with the USA Patriot Act as well as its own rules.

E*Trade made up, documented and maintained a CIP where the brokerage specified that it would verify all accountholders in a joint account but later failed to comply with its own verification procedures.

E*Trade agreed to pay out $1 million penalty, undergo a censure and invite a qualified independent compliance consultant to verify the adequacy of its CIP compliance program.