SEC fines LPL Financial $18M for failed due diligence on new, high-risk accounts

Broker-dealer LPL Financial will pay $18 million to settle charges by the Securities and Exchange Commission (SEC) that its anti-money laundering (AML) program did not properly vet customers and failed to close or restrict thousands of high-risk accounts.

South Carolina-based LPL also violated its own policies and procedures from 2019-23 when it did not close high-risk accounts, “such as cannabis-related and foreign accounts, that were prohibited under LPL’s AML policies,” the SEC said in a press release Friday.

According to the SEC’s order, LPL would properly freeze new accounts flagged for enhanced due diligence, but did not have a timeframe in its policies and procedures for how long the hold should last. In some cases, the account was unfrozen even as the LPL compliance team worked to determine the new customer’s true identity. LPL’s internal audit team flagged the customer due diligence process as problematic several times.