The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has assessed a $14.5 million fine against UBS Financial Services (UBSFS) for willful violation of the Bank Secrecy Act, according to a treasury report.
Five million dollars will be paid to the treasury; the rest will be paid along with other penalties given to UBSFS by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
The FinCEN said UBSFS didn’t develop and use an appropriate anti-money laundering (AML) system to address the risks in accounts from both traditional brokerage and banking services.
UBSFS also failed to put policies and procedures in place to ensure that suspicious activity would be detected and reported, especially for accounts that showed little to no securities trading. In addition, the firm didn’t structure its AML program to look at the use of securities accounts for moving money, instead of what they should be used for – trading securities.
“Broker-dealers providing banking-like services must properly mitigate the AML risks associated with this kind of service. These services enable the flow of funds through mechanisms such as wire transfers, check writing and ATM withdrawals, creating (AML) risks that need to be properly addressed,” said FinCEN Director Kenneth A. Blanco. “Although brokerage firms may provide such services to their clients, those doing so need to apply commensurate diligence to ensure that the firm does not become a conduit for movement of illicit funds, creating a haven for criminals and other malign actors to benefit from, and to further their illicit activity. For more than a decade, UBSFS failed to implement sufficient policies and procedures that adequately addressed the risks associated with the products and services it offered.”
FinCEN said UBSFS kept up the lack of regulation for AML from 2004 to 2014. Also, UBSFS didn’t hire enough people to monitor the situation, creating a backlog of cases that should have been flagged for review.
However, FinCEN said it recognized that UBSFS has made changes and “significant investments in BSA/AML staffing and technology.” These changes demonstrate “its commitment and ability to correct the issues listed in the assessment through significant remedial efforts, including an upgraded AML surveillance monitoring system, enhanced oversight of its AML monitoring, enhanced training for AML compliance staff and the implementation of a new quality assurance system.”