Haywood USA, a wholly owned subsidiary of Canada-based Haywood Securities, will pay $750,000 to settle Securities and Exchange Commission allegations that it failed to maintain adequate anti-money-laundering controls. The SEC order, dated Sept. 11, covers conduct between May 2021 and January 2026.

The commission said the firm failed to file suspicious activity reports with the U.S. Treasury's Financial Crimes Enforcement Network as required by its own written policies. In some cases, Haywood identified information during account openings or client due diligence that presented red flags for potentially suspicious activity, but failed to investigate or notify FinCEN, the SEC said.

In one instance, Haywood opened an account for a business that had difficulty opening an account at another broker-dealer. The firm learned that a convicted criminal was an original member and beneficial owner of the business through a trust he had created and funded, according to the order. Compliance personnel found that one of the trustees had been subpoenaed prior to the account opening concerning the trustee's work on behalf of the unnamed criminal, the SEC said. They also found information indicating the business was a possible vehicle for routing or hiding assets, with the trust acting as a possible conduit for illicit payments.

The firm knew the purpose of opening the account was to deposit several hundred million dollars in shares from a single issuer and to immediately liquidate them, which it did after the account was opened, the commission said. Over a year later, Haywood faced a criminal subpoena from U.S. authorities related to the matter.

In a second case, Haywood opened an account for a British Virgin Islands company owned by a trust established for the children of an individual who had recently resigned as head of a bank in his home country amid an ongoing fraud investigation. The firm learned that the business and trust had been created in nine days, with a series of transactions and transfers from the resigned banker to a relative and from them to the trust, according to the order. The securities in the account were primarily from microcap companies the banker had been involved in as a co-founder, director or affiliate, the SEC said.

Haywood flagged the company as a high-risk account but failed to monitor it for suspicious activity, the commission said. Shortly after the account opened, the unnamed banker was arrested. The firm did not respond to a request for comment.

Following these and other instances, Haywood revised its anti-money-laundering policies, increased its compliance staffing and hired a third-party consultant to bolster annual reviews and testing of its AML compliance program, the SEC said.