April 15, 2020
On April 8, 2020, FINRA imposed sanctions against Chapin, Davis, a FINRA member firm since 1991 with approximately 44 registered representatives from seven branch offices. Chapin, Davis is headquartered in Baltimore, Maryland.
According to the Letter of Acceptance, Waiver and Consent (AWC), Chapin, Davis failed to implement its written Customer Identification Program (CIP), which is used to verify the identity of each customer, and its anti-money laundering (AML) policies and procedures. In one instance of the firm’s CIP failure, a customer opened four joint accounts, naming three or four account holders that were resident citizens of Trinidad and Tobago for each account. The account documentation included incorrect passport numbers and incorrect or missing Tax Identification Numbers, among other incorrect information. Even though firm rules states that account holders’ identities must be verified before account activities commence, the firm allowed customers to open and place trades in the accounts without this verification.
The firm also failed to follow its AML policies and procedures that were meant to “monitor account activity for unusual size, volume, pattern or type of transactions.” The AML procedures were to be implemented through a daily review of exception reports and deposit and withdrawal activity in customer accounts. The firm claims the AML system would also detect a series of red flags including “[w]ire activity that is unexplained, repetitive, unusually large…or with no apparent business purpose.” FINRA asserts that Chapin, Davis failed to identify numerous “red flag” activities including unusual size, volume, pattern, or type of transactions.
To resolve the alleged violations, Chapin, Davis consented to a censure, $35,000 fine, and to provide certification that the firm has updated and implemented its CIP and AML policies and procedures.
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