On 17 January 2025, the United States Securities and Exchange Commission (US SEC) published an order instituting administrative and cease-and-desist proceedings, pursuant to Sections 15(b) and 21c of the United States Securities Exchange Act of 1934 and Section 203(e) of the United States Investment Advisers Act of 1940, making findings, and imposing remedial sanctions and a cease-and-desist order thereby sanctioning LPL Financial LLC, a leading broker-dealer and investment adviser, for extensive anti-money laundering (AML) violations. The US SEC found that the firm had failed to adhere to regulatory obligations designed to prevent financial crime and safeguard market integrity. LPL Financial agreed to pay a civil penalty of $18 million and implement significant remedial measures to address its compliance shortcomings.
The US SEC’s investigation revealed that, between May 2019 and December 2023, LPL Financial had repeatedly failed to enforce its own AML policies. The firm did not adequately verify customer identities as part of its Customer Identification Programme (CIP) and neglected to close or restrict high-risk accounts as mandated by its policies. Among these were cannabis-related and foreign accounts, which were explicitly prohibited under LPL’s AML policies. These lapses exposed the securities market to potential money laundering risks and constituted a breach of federal regulations, including Section 17(a) of the United States Securities Exchange Act of 1934 and US SEC Rule 17a-8.
LPL Financial’s AML violations spanned several years and were marked by persistent internal audit warnings and regulatory non-compliance. In 2020, LPL updated its AML policies to require the closure of accounts that failed identity verification after 60 days. Despite this update, the firm failed to enforce the policy, leaving over 7,300 non-compliant accounts open by 2022. Similarly, LPL’s policies prohibited dealings with cannabis-related businesses and accounts in certain foreign jurisdictions, yet thousands of such accounts remained active, holding significant assets in violation of its internal regulations.
In early 2023, the US SEC initiated a formal investigation into LPL’s practices, prompting the firm to engage a third-party compliance consultant to review and improve its CIP and due diligence procedures. This engagement followed a series of previous internal and external audits that identified significant flaws in LPL’s AML framework. These findings included inadequate staff training, insufficient record-keeping, and the absence of clear procedures for enforcing account closures.
In addition to the $18 million penalty, the US SEC ordered LPL Financial to cease and desist from further violations and required the firm to retain the compliance consultant for ongoing oversight. The consultant’s responsibilities include conducting a comprehensive review of LPL’s AML policies and submitting detailed reports to the US SEC. These reports are required to record findings, provide recommendations for improvement, and assess the firm’s implementation of these measures. The first report is due within 45 days of the order, with subsequent evaluations continuing over the next year.
Stacy Bogert, Associate Director of the SEC’s Division of Enforcement, stated: “Federal law requires broker-dealers to ascertain the identity of their customers and to conduct ongoing customer due diligence to aid the government in its efforts to detect and prevent money laundering. When broker-dealers like LPL fail to comply with their AML obligations, they put the securities markets at risk. Today’s case underscores the importance of complying with applicable regulations in the areas of customer identification and ongoing customer due diligence.”
(Source: https://www.sec.gov/newsroom/press-releases/2025-17, https://www.sec.gov/files/litigation/admin/2025/34-102224.pdf)
