The Financial Industry Regulatory Authority fined UBS Financial Services $4.5 million and UBS Securities LLC $500,000 for failing to establish and implement anti-money laundering programs reasonably designed to monitor certain high-risk transactions in customer accounts.
The high-risk transactions included foreign currency wire transfers at UBS Financial Services, and transactions in penny stocks at UBS Securities.
The Securities and Exchange Commission and the Financial Crimes Enforcement Network, a bureau of the Treasury Department, also announced that UBS Financial Services agreed to pay a $5 million penalty to each of these agencies in separate actions for AML violations.
“When firms are part of global operations involving high-risk international securities trades and money movements, it is critical that they design and implement an AML program tailored for their business model,” Susan Schroeder, FINRA’s executive vice president of the department of enforcement, said in a statement.
From January 2004 to April 2017, UBS Financial Services processed thousands of foreign currency wires for billions of dollars without sufficient oversight, according to FINRA.
UBS Financial Services’ AML surveillance systems failed to reasonably monitor billions of dollars in foreign currency wires flowing through customer accounts, including hundreds of millions of dollars in foreign currency wires to and from countries known to be at high risk for money laundering.
For example, for foreign currency wires to and from certain accounts, UBS Financial Services’ AML surveillance systems did not capture the number and identity of customers, the number and dollar value of the transfers, whether the transfers involved third parties and whether the transfers involved countries known for money-laundering risk.
UBS Financial Services’ failure to monitor these high-risk transactions went undetected for more than eight years until discovered in 2012, and the firm failed to implement a reasonable system until April 2017.
With respect to UBS Securities, FINRA found that the firm failed to reasonably monitor penny stock transactions that its Swiss parent routed to UBS Securities for execution through an omnibus account from January 2013 to June 2017. During this time, UBS Securities facilitated the purchase or sale of more than 30 billion shares of penny stocks valued at more than $545 million through the omnibus account for undisclosed customers.
UBS said in a statement that the firm is pleased to have resolved this matter, which addressed certain legacy anti-money laundering program deficiencies.
“UBS remains fully committed to assisting the government in combating money laundering and other illicit activity,” the firm said.
In its 2018 Regulatory and Examination Priorities Letter, FINRA highlighted anti-money laundering as an area of concern and noted it will assess the adequacy of firms’ AML programs and their policies and procedures to detect and report suspicious transactions.
Think Advisor | December 17, 2018