By Ross Snel
Finra has slapped Morgan Stanley Smith Barney with a $10 million fine for problems in its anti-money laundering program that lasted more than five years.
In an announcement Wednesday, the self-regulator for the brokerage industry said Morgan Stanley’s AML program failed to meet requirements of the Bank Secrecy Act because of three shortcomings:
•Morgan Stanley did not allocate enough resources to review alerts generated by that surveillance system, so its analysts frequently closed alerts without sufficient investigation and/or documentation.
•The company’s AML department failed to “reasonably monitor” customers’ deposits and trades in penny stocks for suspicious activity.
Finra said it found other problems, including a failure to create and maintain a supervisory system capable of complying with securities laws that generally prohibit the offer or sale of unregistered securities. According to the regulator, the company divided responsibility for reviewing customers’ deposits and sales of penny stocks among branch managers and two home-office departments with insufficient coordination among them.
Additionally, Finra said the Morgan Stanley failed to implement policies and procedures to ensure it was conducting periodic risk-based reviews of correspondent accounts it kept for some foreign financial institutions.
The action underscores the importance for broker-dealers of developing and maintaining robust AML programs that are in full compliance with the law.
“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,” said Susan Schroeder, Finra executive vice president, Department of Enforcement, in the announcement. “Firms must ensure that their AML programs are reasonably designed to detect and cause the reporting of potentially suspicious activity.”