Morgan Stanley Faces Probe Over Anti-Money Laundering Practices

Morgan Stanley is reportedly facing a regulatory investigation into its money laundering prevention measures.

The Financial Industry Regulatory Authority (FINRA) has launched a probe into whether the investment banking giant property vetted customers for money laundering risks, The Wall Street Journal (WSJ) reported Tuesday (July 22) evening.

The investigation deals with Morgan Stanley’s clients, risk ranking and other practices from October 2021 through September 2024, sources familiar with the matter told the WSJ. This is on top of the possible fines the company already faces from a multi-agency federal investigation into its anti-money-laundering (AML) practices.

The sources said FINRA has been seeking information on U.S. and international clients in Morgan Stanley’s wealth-management business and the unit that houses its trading desks. This includes information on senior foreign political figures, their family or close associates, along with the Morgan Stanley representatives handling those accounts.

The report notes that while FINRA isn’t a government agency, federal law charges it with overseeing broker-dealers, giving the regulator the authority to levy fines against members that break its rules.

PYMNTS has contacted Morgan Stanley for comment but has not yet gotten a reply.

A WSJ report from last year said the Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency (OCC), the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC) and the Federal Reserve were probing Morgan Stanley to determine how well the bank vets its clients.

The news came two days after the Treasury Department said it would issue a two-year delay on a new anti-money laundering rule focused on investment advisers while FinCEN re-examines the scope of the regulation.

The new AML rule had been set to go into effect at the beginning of 2026, but has now been pushed back to 2028.

A Treasury news release said the postponement was designed “to ensure efficient regulation that appropriately balances costs and benefits” and that it aims to ease the industry’s compliance costs and reduce regulatory uncertainty.

“The IA AML Rule seeks to address ongoing illicit finance risks, threats and vulnerabilities posed by criminals and foreign adversaries that exploit the U.S. financial system and assets through investment advisers,” the release said.

“FinCEN recognizes, however, that the rule must be effectively tailored to the diverse business models and risk profiles of the investment adviser sector.”