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From Securities Regulation Daily, December 18, 2018

UBS Financial Services fined $14.5M for Bank Secrecy Act violations

By Lisa M. Goolik, J.D.

The Financial Crimes Enforcement Network has fined UBS Financial Services, Inc. $14.5 million for Bank Secrecy Act violations. For over a decade, UBS failed to develop, implement, and staff an appropriate, risk-based anti-money laundering (AML) program. According to the assessment, $5 million dollars will be paid to the Treasury Department, while the remainder will be concurrent with penalties for similar or related conduct imposed by the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

Inadequate program. FinCEN determined that, from 2004 to 2017, UBS failed to develop and implement an AML program that adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services.

As a result, UBS failed to adequately monitor foreign currency-denominated wire transfers—amounting to tens of billions of dollars—that were conducted through its commodities accounts and retail brokerage accounts. FinCEN also found that the firm processed through its brokerage accounts hundreds of transactions that exhibited red flags associated with shell company activity.

Inadequate staffing. In addition, FinCEN determined that UBS failed to provide sufficient resources to ensure day-to-day AML compliance, leading to a significant backlog of alerts and decreased UBS’s ability to timely file suspicious activity reports. FinCEN warned that a backlog of transaction alerts and delays in filing SARs "stifles the ability of law enforcement agents to fulfill this critical national security mission."

"Broker-dealers providing banking-like services must properly mitigate the AML risks associated with this kind of service. These services enable the flow of funds through mechanisms such as wire transfers, check writing, and ATM withdrawals, creating AML risks that need to be properly addressed," said FinCEN Director Kenneth A. Blanco. "Although brokerage firms may provide such services to their clients, those doing so need to apply commensurate diligence to ensure that the firm does not become a conduit for movement of illicit funds creating a haven for criminals and other malign actors to benefit from, and to further, their illicit activity."

FinCEN acknowledged that UBS has since made "significant investments" in its AML program and staffing, including an upgraded AML surveillance monitoring system, enhanced oversight of its AML monitoring, enhanced training for AML compliance staff, and the implementation of a new quality assurance system.

Companies: UBS Financial Services, Inc.

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