The Commodity Futures Trading Commission has announced settling charges with futures commission merchant (FCM) CHS Hedging LLC for supervision violations. The regulator found issues with the company’s anti-money laundering (AML), risk management, recordkeeping controls.
According to the official announcement, CHS Hedging failed to implement an adequate AML program and to a futures and options trading account controlled by one of its customers, in particular. Additionally, the company failed to implement risk-based limits concerning trading by that customer.
Acting Director of Enforcement Gretchen Lowe, said:
The Commodity Exchange Act and accompanying regulations require FCMs to have and actually implement adequate AML and risk management policies and procedures. These are critical components to ensure customers are protected from fraud, and the CFTC will not hesitate to take action and require significant sanctions and remediation.
The CFTC stated that one of CHS Hedging’s customers engaged in speculative trading that sustained millions of dollars in losses in their company account from January 2017 through December 2020. The customer and their company made margin payments of more than $147 million to CHS Hedging over the course of that period.
The CFTC found that CHS Hedging accepted those payments from the customer without adequately investigating the source of the funds or reporting the transactions in a Suspicious Activity Report to the Department of the Treasury.
The regulator found that CHS Hedging’s facilitated its customer’s losses by failing to enforce adequate trading limits on his account.
Furthermore, CHS Hedging also failed to maintain certain required records for pre-trade communications and did not produce certain required records promptly or in the form requested by CFTC staff.
The CFTC has imposed a civil monetary penalty of $6.5 million for the supervision lapses and has ordered the company to undertake remedial actions.
The UK financial markets regulator, FCA, recently fined Santander UK £107.7 million for recurrent anti-money laundering lapses.
