San Diego-based Girard Securities has been censured by the Financial Industry Regulatory Authority for unknowingly permitting fraudulent money transfers from customers' accounts.
The firm, which has 360 brokers and 136 branches, has changed its procedures, reimbursed the clients whose money was stolen, and fired its chief compliance officer. Its chief operations officer resigned.
In 2011 and 2012, Girard's clearing firms issued several alerts about a rise in fraudulent email instructions used to effect fraudulent wire transfers. Two of its customers were getting divorced.
In May of 2012, hackers requested by email that funds from the account be transferred to three third parties — one to a Chinese banking corporation in Singapore and another to an account in Texas.
A Girard employee, who was not aware of procedures regarding possible hackers, responded to the crooks by email — not to those who controlled the accounts.
The Anti-Money Laundering Department of the clearing firm expressed escalating concerns that the recipients of these funds were unable to answer basic questions about the purpose of the wires.
"Girard did not establish and maintain systems and procedures, including written procedures, reasonably designed to prevent fraudulent third party wire transfers," says the Financial Industry Regulatory Authority (known as FINRA).