Overview
On December 17, 2018, the Financial Crimes Enforcement Network (“FinCEN”) announced that UBS Financial Services, Inc. (“UBS”) had entered into a consent agreement to resolve violations of the Bank Secrecy Act (BSA). UBS is a global firm providing financial services in over 50 countries, including the US As part of this agreement, UBS will pay $14.5 million in civil penalties to US regulators — $5 million of which will be paid to the US Department of the Treasury, while the remainder will be made concurrent with penalties imposed by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
According to FinCEN, UBS willfully violated anti-money laundering (AML) program requirements and failed to conduct ongoing due diligence on correspondent accounts for foreign financial institutions for more than a decade. Violations included: failure to develop and implement an appropriate risk-based AML program that adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services; failure to implement appropriate policies and procedures to ensure the detection and reporting of suspicious activity; failure to hire and retain sufficient AML compliance staff to meet its obligations under the BSA, resulting in a backlog of cases that hindered UBS’s ability to investigate and report suspicious activity; and failure to adequately monitor foreign currency-denominated wire transfers conducted through commodities accounts and retail brokerage accounts. These practices violated UBS’s obligations as a brokerage firm providing bank-like services to develop and implement an adequate AML program.
In assessing this penalty, FinCEN considered the size and sophistication of UBS — a large, international broker-dealer — and noted the severity and duration of the firm’s BSA violations. FinCEN also recognized UBS’s cooperation with FinCEN, the Securities and Exchange Commission, and the Financial Industry Regulatory Authority.
As indicated by this enforcement action, regulators of securities dealers have joined federal financial regulators in prioritizing anti-money laundering monitoring and compliance as an area of increased oversight. FINRA highlighted anti-money laundering as an area of concern in its 2018 Regulatory and Examination Priorities Letter. In the UBS action, FinCEN focused in particular on the need for broker-dealers to implement appropriate AML programs where “banking-like” services such as wire transfers, check writing, and ATM withdrawals are offered. Broker-dealers providing similar services should take note of this enforcement action.
