Morgan Stanley Fined $10M for Failing to Supervise Anti-Money Laundering Program
FINRA, the nonprofit organization that protects investors and market integrity, concluded that Morgan Stanley's anti-money laundering (AML) program failed to meet the requirements of the Bank Secrecy Act because of three major issues.
December 26, 2018 at 04:41 PM
2 minute read
Morgan Stanley. Photo: C. Ryan Barber/ ALM
The Financial Industry Regulatory Authority has issued a $10 million fine against the broker-dealer Morgan Stanley Smith Barney LLC after concluding it failed to properly supervise an anti-money laundering program over a period of five years.
FINRA, the nonprofit organization that protects investors and market integrity, concluded that Morgan Stanley's anti-money laundering (AML) program failed to meet the requirements of the Bank Secrecy Act because of three major issues:
First, Morgan Stanley's automated AML surveillance system didn't receive data from several systems, “undermining the firm's surveillance of tens of billions of wire and foreign currency transfers.” Second, it “failed to devote sufficient resources to review alerts generated by its automated AML surveillance system,” according to the news release. And third, Morgan Stanley didn't “reasonably monitor customers' deposits and trades in penny stock for potentially suspicious activity, despite the fact its customers deposited almost 2.7 billion shares of penny stock, which resulted in sales totaling approximately $164 million.”
FINRA also concluded that Morgan Stanley “failed to establish and maintain a supervisory system that complies with Section 5 of the Securities Act of 1933 which generally prohibits the sale of unregistered securities,” the release said.
Susan Schroeder, FINRA executive vice president, department of enforcement, said in a prepared statement: “As we stated in our 'Report on FINRA Examination Findings' released earlier this month, FINRA continues to find problems with the adequacy of some firms' overall AML programs, including allocation of AML monitoring responsibilities, data integrity in AML automated surveillance systems, and firm resources for AML programs.” She added, “firms must ensure that their AML programs are reasonably designed to detect and cause the reporting of potentially suspicious activity.”
Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
“We are pleased to have resolved this matter from several years ago,” according to a statement released by Morgan Stanley. “We continuously work to strengthen our controls and have been recognized by FINRA for the extraordinary steps we have taken to expand and enhance our AML program.”
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