Morgan Stanley To Pay $10M For Anti-Money Laundering Failures (#GotBitcoin)

The Financial Industry Regulatory Authority (FINRA) said the lapses spanned more than five years, from January 2011 until April 2016.

Morgan Stanley, which agreed to the fine as part of a settlement, did not admit nor deny FINRA’s charges, but consented to the entry of the regulator’s findings.

“We are pleased to have resolved this matter from several years ago,” Morgan Stanley said in a statement.

FINRA rules require brokerages to have policies and procedures in place to comply with a federal law aimed at detecting and curbing money laundering.

A Morgan Stanley automated surveillance system did not receive important data from other Morgan Stanley systems, FINRA said. The lapse impaired the firm’s overall tracking of tens of billions of dollars of wire and foreign currency transfers, FINRA said.

Those transactions included transfers to and from countries known for money laundering risk, FINRA said.

In 2015, a consultant that Morgan Stanley hired to test its surveillance identified several “high risk” issues, according to the settlement agreement. Morgan Stanley did not fix one of those problems until at least February 2017.

Morgan Stanley’s other violations include failing to “reasonably monitor” customers’ deposits of 2.7 billion shares of penny stock between 2011-2013, FINRA said.

Low-priced securities, such as penny stocks, are often subject to efforts by fraudsters to falsely inflate trading volume and share prices, a securities law violation that is frequently a precursor to money-laundering, according to anti-money laundering compliance professionals.

Morgan Stanley has taken “extraordinary steps” since 2013 to improve its anti-money laundering programs, including a new automated process for monitoring of penny stock transactions and potential insider trading, FINRA said in the settlement.

Updated: 4-11-2024

Morgan Stanley’s Wealth-Management Division Investigated For Money-Laundering Risk

Some Of The US Government Investigating Agencies Include:

* The Securities And Exchange Commission
* The Office Of The Comptroller Of The Currency
* The Treasury Department
* The Federal Reserve
* The Treasury’s Financial Crimes Enforcement Network, Known As FinCEN
* Treasury’s Office Of Foreign Assets Control

The SEC’s list includes a billionaire with ties to Russia who has been sanctioned by the U.K. and an individual who claimed she was based in the U.S. but whose activity on E*Trade indicated she was located on a Caribbean island and had more money in her account than would be typical for someone with her stated occupation.

The wealth-management juggernaut overseeing a total of about $5 trillion. The division, which accounts for about half of the company’s total revenue these days, generates steady revenue streams Morgan Stanley.

Pass Misdeeds ($600 Million In Fines) Of Morgan Stanley:

💸 July 2014

Morgan Stanley agreed to pay $275 million to settle SEC charges that it misled investors in a pair of residential mortgage-backed securities securitizations that it underwrote, sponsored, and issued.

📈 December 2014

The SEC hit Morgan Stanley with a $4 million penalty for violating the market access rule.

🚗 December 2015

Morgan Stanley Investment Management, its capital management arm, agreed to pay $8.8 million to settle charges that one of its portfolio managers illegally prearranged trading, known as “parking,” that favored certain advisory client accounts over others.

👨‍💻 June 2016

Morgan Stanley Smith Barney (MSSB) — its U.S. wealth management business, now called Morgan Stanley Wealth Management — agreed to a $1 million penalty to settle charges related to its failures to protect customer information, some of which was hacked and offered for sale online.

💵 December 2016

Morgan Stanley agreed to pay $7.5 million to settle charges that it used trades involving customer cash to lower its borrowing costs in violation of the SEC’s Customer Protection Rule.

🧾 January 2017

MSSB agreed to a $13 million penalty to settle charges that it overbilled investment advisory clients due to coding and other billing system errors.

Later that same month, the unit agreed to another $2.96 million penalty to settle charges that they made false and misleading statements about a foreign exchange trading program they sold to investors.

📊 February 2017

MSSB agreed to an $8 million penalty and admitted wrongdoing to settle charges related to single inverse ETF investments it recommended to advisory clients.

🏦 June 2018

MSSB agreed to pay a $3.6 million penalty and implemented procedural and policy changes over its failure to prevents its personnel from misusing or misappropriating funds from client accounts.

💰 May 2020

MSSB agreed to create a $5 million fund to be distributed to harmed investors, settling charges that it provided misleading information to clients in its retail wrap fee programs regarding trade execution services and transaction costs.

🔄 September 2020

MSSB agreed to a $5 million penalty to settle charges that it violated regulations governing short sales in its brokerage prime swaps business.

ℹ️ September 2022

MSSB agreed to pay $35 million to settle SEC claims that it repeatedly failed to protect millions of customers’ personal information.

💲January 2024

Morgan Stanley agreed to pay more than $249 million to settle fraud charges and for failing to enforce information barriers.

Meanwhile:

The Securities and Exchange Commission, the Office of the Comptroller of the Currency and other Treasury Department offices are involved, according to people familiar with the matter. That is in addition to the Federal Reserve, whose similar probe The Wall Street Journal reported in November. The Fed has told the bank that supervisory action is under consideration.

The main issues regulators are looking at boil down to whether Morgan Stanley has been sufficiently investigating the identities of prospective clients and where their wealth comes from, as well as how it monitors its clients’ financial activity. Some of the probes are focused on the bank’s international clients.

The bank has been working on addressing the issues regulators have raised. When asked about some of the regulatory scrutiny in January, Morgan Stanley’s former chief executive and current executive chairman, James Gorman, told the Journal the bank is investing in compliance, technology and artificial intelligence to better understand the flow of money tied to its wealth business.

Morgan Stanley shares fell sharply after the Journal reported on the wider probe, and were down more than 5% in afternoon trading on Wednesday.

The SEC last year sent Morgan Stanley a list of current and former clients with questions about how they were vetted. It also questioned why Morgan Stanley’s financial-adviser unit, which works directly with affluent individuals, did business with some clients who were cut off by E*Trade, the Morgan Stanley-owned digital trading platform, because of red flags.

The SEC’s list includes a billionaire with ties to Russia who has been sanctioned by the U.K. and an individual who claimed she was based in the U.S. but whose activity on E*Trade indicated she was located on a Caribbean island and had more money in her account than would be typical for someone with her stated occupation.

The Treasury’s Financial Crimes Enforcement Network, known as FinCEN, also sent the bank a list of client names, at least some overlapping with the SEC’s.

Morgan Stanley also received an administrative subpoena from Treasury’s Office of Foreign Assets Control requesting information on the firm’s sanctions policies and procedures, according to a bank document viewed by the Journal.

The OCC late last year sent Morgan Stanley what is known as a matter requiring attention over customer due diligence. That followed an annual exam of the bank’s anti-money-laundering and related programs, according to some of the people and a Morgan Stanley document that says the firm sent detailed action plans to the regulator.

Morgan Stanley’s wealth unit has been critical to the firm’s strategy since the 2008-09 financial crisis. The bank made several acquisitions, including those of Smith Barney and, more recently, E*Trade, that turned it into a wealth-management juggernaut overseeing a total of about $5 trillion.

The division, which accounts for about half of the company’s total revenue these days, generates steady revenue streams Morgan Stanley relies on to help smooth out downturns in investment banking and trading.

The wealth division has been showing signs of slowing down, with revenue flat in the fourth quarter from a year earlier. Net new assets totaled $47.5 billion in the period, down 8% from a year earlier after a 45% decline in the third quarter.

The SEC and FinCEN have taken an interest in differences in the vetting procedures of E*Trade and Morgan Stanley’s financial-adviser unit.

They have been asking the bank about how it compared E*Trade’s technology and vetting processes with Morgan Stanley’s before deciding to replace much of E*Trade’s procedures with its own.

Related Articles:

Probes Reveal Central, US-Based, International Banks All Have Sticky Fingers (#GotBitcoin?)

Major Banks Suspected Of Collusion In Bond-Rigging Probe (#GotBitcoin?)

Some Merrill Brokers Say Pay Plan Urges More Customer Debt (#GotBitcoin?)

Deutsche Bank Handled $150 Billion of Potentially Suspicious Flows Tied To Danske (#GotBitcoin?)

Wall Street Fines Rose in 2018, Boosted By Foreign Bribery Cases (#GotBitcoin?)

U.S. Market-Manipulation Cases Reach Record (#GotBitcoin?)

Poll: We Should Get Rid of The Federal Reserve And Central Banks Because:

Your questions and comments are greatly appreciated.

Monty H. & Carolyn A.