UBS Faces $125 Million FinCEN Penalty in Four-Regulator AML Case

UBS Financial Services admitted to willful Bank Secrecy Act violations as FinCEN imposed a $125 million civil money penalty over anti-money laundering failures involving foreign-currency wire monitoring. The Treasury bureau resolved the case alongside related actions by the SEC, FINRA and CFTC.The related orders carried $173 million in nominal penalties, but UBSFS is not expected to pay that amount in cash because FinCEN credited the $48 million market-regulator penalties against its $125 million assessment. UBSFS must pay $62 million to the US Treasury, while up to $15 million may be waived if the firm completes specified AML review and remediation work.FX Wire Monitoring Failed for YearsFrom January 2019 to June 2023, thousands of FX wires were either insufficiently reviewed or left out of monitoring. UBS initially relied on a quarterly, manually generated report that was poorly suited to identifying suspicious patterns and often lacked important geographic information.The firm introduced an automated monitoring system in 2021, but implementation brought further data problems. Some systems sent a 4pm feed instead of a complete end-of-day file, while a change in transaction labels prevented certain FX wires from being recognised and transmitted for review.The SEC also identified problems involving transaction-matching logic, weekend data files, currency codes and wire reference numbers. The new system lacked an exception queue for transactions it could not process.FINRA said UBS failed to monitor reasonably more than 60,000 FX wires worth over $10 billion during the period. After the automated system went live, about one-third of FX wires in retail accounts approved for spot FX activity were omitted from monitoring, according to the self-regulatory organisation.Repeat Violations Drove the CaseFinCEN said the violations followed its own 2018 consent order against UBSFS, which carried a $14.5 million penalty and addressed earlier BSA failures, including weaknesses in foreign-currency wire monitoring. FINRA also treated the conduct as a repeat violation. It fined UBS $4.5 million in 2018 over deficient FX wire monitoring, but later found that the firm had not remedied the problems covered by that settlement.The regulators also identified weaknesses in customer due diligence. FinCEN said UBSFS failed to address risks involving high-risk customers with ties to Russia and Latin America. FINRA separately cited failures to update risk profiles for some clients linked to higher-risk locations, adverse media or possible political exposure.Four Authorities Addressed Related DutiesFinCEN addressed willful BSA violations, including failures to implement and maintain an AML programme and to file suspicious activity reports. FINRA levied $20 million for shortcomings in the AML programme and customer due diligence. The SEC ordered a $20 million penalty after finding late suspicious activity reports in violation of broker-dealer recordkeeping rules under the Exchange Act. The CFTC imposed an $8 million penalty for supervisory failures affecting transaction monitoring in retail commodity accounts.UBS engaged a consultant in 2022 to address FX-wire data deficiencies and conduct a retrospective review. The SEC said the resulting late reports covered thousands of suspicious transactions worth about $250 million.Under the FinCEN order, UBSFS must work with a third party to complete a lookback for suspicious transactions that went undetected and undergo an independent review of its AML programme. This article was written by Tanya Chepkova at www.financemagnates.com.