FinCEN Imposes Record $125 Million Penalty on UBS Financial Services
From the desk of Jim Eccleston at Eccleston Law
The Financial Crimes Enforcement Network (FinCEN) has imposed a $125 million civil money penalty against UBS Financial Services Inc. (UBSFS) for willful violations of the Bank Secrecy Act (BSA). According to Barron's, FinCEN described the penalty as the largest ever imposed against a broker-dealer for BSA violations.
Barron's reports that the enforcement action marks FinCEN's second action against UBSFS. In December 2018, UBS entered into a Consent Order with FinCEN that imposed a $14.5 million civil money penalty for BSA violations. That order identified weaknesses in UBS's automated monitoring system that prevented the firm from adequately monitoring foreign currency wires.
Despite assuring FinCEN that it would remediate those deficiencies, UBS failed to do so. The firm subsequently failed to appropriately monitor more than 50,000 foreign currency wires totaling more than $10 billion. Barron's adds that UBS also failed to disclose the continuing deficiencies to FinCEN. The agency discovered the problems during a later investigation that followed a regulatory examination.
According to Barron's, FinCEN also found deficiencies in UBS's customer due diligence (CDD), particularly involving high-risk customers with connections to Russia and Latin America. According to FinCEN, UBS failed to adequately evaluate and mitigate money laundering and other illicit finance risks associated with some customers' sources of wealth. The firm also failed to appropriately address negative news reports alleging certain customers' connections to corruption, fraud, and money laundering, including circumstances in which a UBS affiliate had raised concerns about the negative information.
These deficiencies contributed to UBS's failure to timely report hundreds of suspicious transactions, which deprived law enforcement of potentially important information.
As part of the resolution, UBS admits that it willfully violated the BSA, including by failing to implement and maintain an adequate anti-money laundering (AML) program and failing to file suspicious activity reports.
The Consent Order requires UBS to retain a third party to conduct a lookback designed to identify suspicious transactions that the firm failed to detect because of the identified compliance deficiencies. UBS must report any identified suspicious transactions to FinCEN. The firm must also undergo an independent review of its AML program.
According to Barron's, FinCEN tailored the independent review to the deficiencies underlying the violations and directed the review toward priority illicit finance risks involving the U.S. Southwest border, cartels and possible narcotics trafficking, Iran, Russia, and Venezuela.
FinCEN also created a financial incentive for remediation. If UBS satisfactorily completes the AML program review and implements the third party's recommendations, FinCEN will waive up to $15 million of the expenses UBS incurs in connection with the undertaking.
FinCEN emphasized that financial institutions should promptly address AML compliance failures identified by regulators, auditors, or employees. The agency found that UBSFS continued to experience deficiencies in monitoring foreign currency transactions after reaching settlements with FinCEN, the SEC, and FINRA concerning the same failures.
FinCEN also reminded financial institutions to communicate with regulators about compliance problems, particularly when those problems involve issues addressed in prior enforcement actions. The agency expects financial institutions to take full accountability when enforcement investigations identify violations according to Barron's.
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Tags: eccleston, eccleston law, fincen, ubs financial services, securities law, financial regulation, anti-money laundering
