FINRA Fines Mundial Financial Group $100,000 Over Registration and AML Failures

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Mundial Financial Group, LLC has agreed to pay a $100,000 fine and accept a censure as part of a settlement with the Financial Industry Regulatory Authority (FINRA) over multiple regulatory violations spanning several years.

According to FINRA, from January 2018 to at least January 2024, the firm allowed its indirect owner to act in a principal capacity and as a registered representative without being properly registered. During this period, the individual served as the firm's primary source of new business, solicited most of its customers, and managed client relationships. He also presented himself as working for Mundial, including using a firm email address, and was involved in major business, operational, and financial decisions.

FINRA stated that Mundial was aware the indirect owner was not registered "in any capacity" but nonetheless permitted him to actively manage the firm's securities business, in violation of FINRA and former NASD registration and conduct rules.

The regulator also found deficiencies in Mundial's customer identification and anti-money laundering (AML) controls. From September 2019 onward, FINRA said the firm could not form a reasonable belief that it knew the true identities of its customers or develop appropriate customer risk profiles because its Customer Identification Program (CIP) procedures were not reasonably tailored to its customer base.

Mundial operates as an introducing broker-dealer offering self-directed trading. FINRA noted that its roughly 35 customers were primarily individuals or entities domiciled outside the United States, predominantly in China, and that some traded low-priced securities or had financial connections to issuers of securities deposited into their accounts. Despite these factors, the firm's CIP procedures did not address non-in-person account openings or how to verify identity documents written in foreign languages.

FINRA also cited instances in which electronic account applications contained discrepancies in income and net worth information, or where multiple, seemingly unrelated customers shared the same physical or email addresses. The firm approved those accounts without additional verification or consideration of the discrepancies when developing customer risk profiles.

In addition, FINRA found that from September 2019 to the present, Mundial failed to establish and implement an AML program reasonably designed to detect and report suspicious transactions, including potentially manipulative trading. While the firm's written procedures listed certain red flags, they did not explain how to identify, investigate, or escalate them. In practice, Mundial relied on manual reviews of daily reports from its clearing firm, which FINRA said were not sufficient to identify suspicious trading patterns across accounts or over time.

As a result, the firm failed to detect or investigate multiple red flags, including large deposits relative to reported net worth, the simultaneous opening of multiple accounts to deposit the same securities, and attempted transfers of large volumes of low-priced securities shortly after being deposited.

FINRA further determined that Mundial lacked adequate risk-based procedures to monitor and report suspicious activity related to potential insider trading. Although the firm was aware of several customers who were corporate insiders, it had no effective process to track trading restrictions or monitor compliance.

Along with the monetary fine and censure, Mundial agreed to undertake remedial actions as part of the settlement.

Mundial Financial Group has been a FINRA member since 2011. The New York-based firm operates one branch, employs three active registered representatives, and offers self-directed trading to retail investors through its clearing firm.