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UBS Fined $14.5M Over Alleged 13-Year Anti-Money Laundering Lapse

December 18, 2018

Wirehouse UBS has agreed to pay $14.5 million in fines over allegations its broker-dealer unit failed to enforce anti-money laundering compliance during the course of 13 years, according to U.S. regulators.

The SEC and FinCen, a bureau of the United States Department of the Treasury, each fined broker-dealer UBS Financial Services Inc. $5 million over the alleged AML violations, according to FinCen.

From 2004 to 2017, the firm allegedly failed to structure its AML program “to address the use of securities accounts for the purpose of moving funds rather than trading securities,” in particular through failure to implement a proper AML program to address risks in accounts that “included both traditional brokerage and banking-like services,” FinCen says.

Banking-like services include wire transfers, check writing and ATM withdrawals, and brokerages offering such services must “apply commensurate diligence” to ensure they’re not used to move illicit funds, FinCEN director Kenneth Blanco says in a press release.

As a result of its alleged lapses, UBSFS let slip “hundreds of transactions” through its brokerage accounts that threw up red flags in connection with the use of shell companies, the regulator says.

Moreover, tens of billions of dollars in wire transfers moved through the firm’s commodities and retail brokerage accounts denominated in foreign currencies, which the firm allegedly failed to monitor, according to FinCen.

UBSFS also failed to adequately staff the team responsible for filing suspicious activity reports, which led to a backlog of alerts, according to the regulator. But FinCen also acknowledges that the company has already made significant improvements in its AML surveillance and oversight and training of compliance staff.

Finra, meanwhile, fined UBSFS $4.5 million over the AML failures, and also fined UBS Securities a further $500,000 for allegedly failing to reasonably monitor penny stock trades routed from the Swiss parent company to UBSS, according to a press release from Finra.

In agreeing to pay the Finra fine, the companies neither admitted nor denied the charges, the industry’s self-regulator says.

By Alex Padalka