WASHINGTON—Today, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) assessed a $125,000,000 civil money penalty against UBS Financial Services Inc. (UBSFS) for willful violations of the Bank Secrecy Act (BSA), the primary U.S. anti-money laundering and countering the financing of terrorism law that safeguards the financial system from illicit use. This is the largest penalty ever imposed against a broker-dealer for BSA violations to date.
“Today’s historic action against UBSFS should send a clear message that recidivist financial institutions will face severe repercussions,” said FinCEN Director Andrea Gacki. “Repeat violators of the Bank Secrecy Act jeopardize the integrity of our financial system, especially those that expose it to high-risk customers and activities without effective controls.”
This is FinCEN’s second enforcement action against UBSFS. In December 2018, UBSFS entered into a Consent Order with FinCEN for violations of the BSA that assessed a civil money penalty of $14.5 million. Among other things, the 2018 Consent Order found that UBSFS failed to adequately monitor foreign currency wires due to weaknesses in UBSFS’s automated monitoring system. Despite UBSFS assuring FinCEN that it would soon remediate the underlying issues, UBSFS did not do so and subsequently failed to appropriately monitor over 50,000 foreign currency wires with an aggregate value of more than $10 billion. Moreover, UBSFS did not disclose these failings to FinCEN, which learned of them only through a subsequent investigation FinCEN initiated following a regulatory examination.
UBSFS also failed to comply with its obligations to perform appropriate customer due diligence (CDD), particularly in connection with its provision of services to high-risk customers with ties to Russia and Latin America. FinCEN’s investigation identified instances of UBSFS failing to appropriately consider and mitigate money laundering and other illicit finance risks associated with these customers’ source of wealth as well as negative news reports that such customers had alleged ties to corruption, fraud, and money laundering—even when one of UBSFS’s own affiliates expressed concerns about such negative news. As a result of these and other deficiencies, UBSFS failed to timely report hundreds of suspicious transactions, thereby depriving law enforcement of critical information.
As part of its resolution with FinCEN, UBSFS admits that it willfully violated the BSA, including failing to implement and maintain an AML program, and file suspicious activity reports.
The Consent Order published today requires UBSFS to work with a third party to complete a lookback to identify and report to FinCEN suspicious transactions that went undetected due to the failures noted above and to undergo an independent review of its AML program. FinCEN recognizes the effort and complexity in building and managing operations associated with a robust AML compliance program. The independent review is tailored to focus specifically on deficiencies that contributed to UBSFS’s violations and will deliver tangible outcomes by evaluating the effectiveness of UBSFS’s AML program in addressing priority illicit finance risks, including (1) the U.S. Southwest border, cartels, and possible narcotics trafficking; (2) Iran; (3) Russia, and (4) Venezuela. In a demonstration of FinCEN’s commitment to financial institutions’ meaningful remediation of AML deficiencies and consequential investments to enhance their AML programs, upon satisfactory completion of the review of UBSFS’s AML program and its implementation of the third party’s recommendations, FinCEN will waive up to $15 million for the expenses incurred by UBSFS in connection with this undertaking.
FinCEN appreciates the effective cooperation on this matter with the Commodity Futures Trading Commission, the U.S. Securities and Exchange Commission (SEC), and the Financial Industry Regulatory Authority (FINRA).
Compliance Considerations
Effective AML programs can safeguard national security by preventing financial institutions from being used to facilitate money laundering and the financing of terrorism. Such programs should be risk-based and commensurate with the size, structure, risk profile, and complexity of the financial institution, including the risks that may be associated with the provision of wealth management services to foreign persons located in, or who derive their source of wealth from, high-risk jurisdictions.
Financial institutions are expected to promptly remediate AML compliance failures uncovered by regulators, auditors, and employees. In this instance, FinCEN found that UBSFS continued to fail to monitor foreign currency transactions well after entering a settlement with FinCEN, the SEC, and FINRA for the same failures. Despite UBSFS’s assurances that it would remediate these deficiencies, it failed to meaningfully address those concerns for years, with significant aspects of such remediation not undertaken until FinCEN’s investigation was already underway. Financial institutions are also encouraged to discuss such issues with their regulators, especially when they relate to matters that have been the subject of prior enforcement actions. Similarly, FinCEN expects financial institutions to take full accountability for violations when they are identified in an enforcement investigation.
Covered financial institutions subject to FinCEN’s 2016 CDD Rule, including broker-dealers providing wealth management services to customers that pose elevated risks for money laundering or other illicit activities, are reminded of the importance of conducting meaningful risk-based CDD, both at onboarding and then throughout the life of the customer relationship by maintaining and updating customer information on a risk basis. Such risk-based CDD does not include, for example, a focus on simply “papering” dispositions of apparent risks but rather an objective identification and assessment of the risks presented—both at the inception of a customer relationship and those that manifest over time—and a proportionate response to meaningfully address such risks, including through the application of commensurate controls.
For additional information regarding the facts and circumstances associated with this enforcement action, including the specific BSA violations and the underlying conduct, please see the Consent Order between FinCEN and UBSFS.
FinCEN Whistleblower Incentive Program
FinCEN maintains a whistleblower incentive program for violations of the BSA and certain national security laws such as the International Emergency Economic Powers Act. Individuals located in the United States or abroad who provide information may be eligible for awards if the information they provide leads to a successful enforcement action that results in monetary penalties exceeding $1,000,000 and the statutory requirements in 31 U.S.C. 5323 are otherwise met. FinCEN is currently accepting whistleblower tips. More information about the whistleblower program can be found here.
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