Morgan Stanley unit to pay $10 million fine for anti-money laundering violations

[Eugene]

Source: Reuters

BUSINESS NEWS DECEMBER 26, 2018 / 10:39 AM / UPDATED 25 MINUTES AGO

Morgan Stanley unit to pay $10 million fine for anti-money laundering violations

Suzanne Barlyn
3 MIN READ

(Reuters) - Wall Street’s industry funded watchdog fined the U.S. brokerage unit of Morgan Stanley $10 million on Wednesday for compliance failures in the firm’s anti-money laundering program, the regulator said.

The Financial Industry Regulatory Authority (FINRA) said the lapses spanned more than five years, from January 2011 until April 2016.

Morgan Stanley, which agreed to the fine as part of a settlement, did not admit nor deny FINRA’s charges, but consented to the entry of the regulator’s findings.

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A Morgan Stanley automated surveillance system did not receive important data from other Morgan Stanley systems, FINRA said. The lapse impaired the firm’s overall tracking of tens of billions of dollars of wire and foreign currency transfers, FINRA said.

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Read more: https://www.reuters.com/article/us-morgan-stanley-fine/morgan-stanley-unit-to-pay-10-million-fine-for-anti-money-laundering-violations-idUSKCN1OP0YL

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Source: Financial Industry Regulatory Authority

For Release: Wednesday, December 26, 2018

FINRA Fines Morgan Stanley $10 Million for AML Program and Supervisory Failures

WASHINGTON - FINRA announced today that it has fined Morgan Stanley Smith Barney LLC $10 million for anti-money laundering (AML) program and supervisory failures that spanned a period of more than five years.

FINRA found that Morgan Stanley’s AML program failed to meet the requirements of the Bank Secrecy Act because of three shortcomings:

» First, Morgan Stanley’s automated AML surveillance system did not receive critical data from several systems, undermining the firm’s surveillance of tens of billions of dollars of wire and foreign currency transfers, including transfers to and from countries known for having high money-laundering risk.

» Second, Morgan Stanley failed to devote sufficient resources to review alerts generated by its automated AML surveillance system, and consequently Morgan Stanley analysts often closed alerts without sufficiently conducting and/or documenting their investigations of potentially suspicious wire transfers.

» Third, Morgan Stanley’s AML Department did not reasonably monitor customers’ deposits and trades in penny stock for potentially suspicious activity, despite the fact that its customers deposited approximately 2.7 billion shares of penny stock, which resulted in subsequent sales totaling approximately $164 million during that time period.

FINRA also found that Morgan Stanley failed to establish and maintain a supervisory system reasonably designed to comply with Section 5 of the Securities Act of 1933, which generally prohibits the offer or sale of unregistered securities. In particular, Morgan Stanley divided responsibility for vetting its customers’ deposits and sales of penny stock among its branch management and two home office departments without reasonable coordination among them. Instead, the firm primarily relied on its customers’ representations that the penny stock they sought to deposit was not restricted from sale, and the representations of issuers’ counsel that the customers’ sales complied with an exemption from the registration requirements. As a result, Morgan Stanley failed to reasonably evaluate the customers’ penny stock transactions for "red flags" indicative of potential Section 5 violations.

Moreover, FINRA found that Morgan Stanley failed to implement its policies, procedures, and controls to ensure that it conducted risk-based reviews on a periodic basis of the correspondent accounts it maintained for certain foreign financial institutions.

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Read more: http://www.finra.org/newsroom/2018/finra-fines-morgan-stanley-10-million-aml-program-and-supervisory-failures

[Ferrets are Cool]

1. Just a guess, but I would think that a $10M fine would be like

hitting me with a $10 fine.