UBS Financial Services was hit with a total of $28 million in fines from the Financial Industry Regulatory Authority (FINRA) and the Commodity Futures Trading Commission (CFTC) for anti-money laundering (AML) violations.
FINRA fined UBS $20 million after finding that UBS Financial again failed to establish and implement an AML compliance program to detect suspicious transactions involving foreign currency wires. FINRA also found that UBS did not implement its customer due diligence program and failed to detect and report suspicious money movements by those customers.
“Member firms operating in global markets bear a responsibility to design and implement AML programs that are tailored to their business model and capable of reasonably monitoring transactions for potentially suspicious activity,” Bill St. Louis, head of enforcement at FINRA, said. “This action underscores FINRA’s approach to progressive discipline, which includes escalating sanctions for recidivist misconduct.”
FINRA had fined UBS Financial $4.5 million in December 2018 for failing to monitor foreign currency wires, which allow customers to send and receive foreign currency. During a subsequent routine examination of the member firm, FINRA discovered that UBS failed to remediate the foreign currency wire monitoring violations at issue in the 2018 settlement. As a result, the firm’s AML program failures persisted through June 2023.
Between January 2019 and January 2021, UBS continued to use the unreasonable legacy monitoring system that was the subject of the member firm’s 2018 settlement. This system included a quarterly manual review of a report that contained thousands of foreign currency wires, which did not reasonably allow for the identification of suspicious or unusual patterns and often failed to include information related to the geographic locations at issue.
The firm implemented an automated transaction monitoring tool in February 2021 which, due to an incomplete data file and labeling change, omitted a significant percentage of the firm’s activity. This omitted activity included approximately 33 percent of foreign currency wires in retail customer accounts approved to engage in foreign currency spot activity.
Also, between January 2019 and June 2023, UBS failed to monitor more than 60,000 foreign currency wires totaling more than $10 billion, including wires involving high-risk geographic locations, excessive transfers, unusually large dollar amounts, no apparent business purpose, and instances where the firm previously filed suspicious activity reports for similar activity by the same accounts.
Additionally, UBS Financial did not reasonably implement its customer due diligence program with respect to certain retail customers, failing to detect and investigate risk factors. These factors included customers’ connections to higher risk geographic locations, including Russia, unexplained changes in domicile and employment, material adverse media, and potential political exposure. This led UBS Financial to incorrectly assign and maintain lower risk ratings for those customers, resulting in less scrutiny of their transaction activity. As a result, UBS Financial did not detect and report certain suspicious transactions involving money movements.
UBS Financial accepted and consented to FINRA’s findings, without admitting or denying them.
The CFTC also settled charges against UBS for failing to diligently supervise its anti-money laundering transaction monitoring systems for wire transfers denominated in foreign currencies (FX).
Under the CFTC order, UBS must pay an $8 million civil monetary penalty and cease and desist from further violations.
The CFTC order found that from January 2019 through June 2023, due to deficiencies in UBS’s configuration of the relevant surveillance tools and data governance practices, thousands of FX wires sent or received through retail customer commodity accounts were either insufficiently monitored or omitted from transaction monitoring for AML compliance.
For part of the relevant period, UBS used a manually generated report that failed to capture all relevant FX wires for monitoring and was not tailored to identify patterns of suspicious activity in FX wire transactions. In 2021, UBS transitioned to using an automated system to monitor all wire transactions for suspicious activity. However, UBS failed to properly configure the data flowing into the new system, causing issues that impacted the efficacy of its suspicious activity monitoring function.
The Treasury’s Financial Crimes Enforcement Network and the Securities and Exchange Commission also settled related actions against UBS.