UBS Fined $15 Million Over Anti-Money-Laundering Systems

By Maria Armental & Samuel Rubenfeld

UBS Group AG agreed to pay a combined $15 million fine over regulatory deficiencies in its anti-money-laundering program, U.S. regulators said Monday.

The U.S. Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, said broker-dealer unit UBS Financial Services Inc. violated the Bank Secrecy Act, which requires financial firms to report suspicious activities, over a roughly 13-year period through 2017.

The UBS broker-dealer unit provided clients with what U.S. regulators called “banking-like services,” such as wire transfers, check writing and ATM withdrawals, but it didn’t structure its anti-money-laundering compliance program to address the potential use of its offerings for illicit-finance purposes, regulators said.

UBS is to pay $5 million to the Treasury Department, $5 million to the Securities and Exchange Commission and another $5 million to the Financial Industry Regulatory Authority, the industry-funded brokerage regulator.

The bank “is pleased to have resolved this matter, which addressed certain legacy anti-money-laundering program deficiencies,” a spokesman for UBS said.

The Office of the Comptroller of the Currency this year censured UBSover “systemic deficiencies” in anti-money-laundering systems at its branches in New York, Connecticut and Florida. The order didn’t carry monetary penalties.

FinCEN said Monday that UBS Financial Services had failed to provide sufficient resources to ensure day-to-day anti-money-laundering compliance. Inadequate staffing led to a backlog of alerts and decreased the broker-dealer’s ability to file timely suspicious-activity reports, FinCEN said.

UBS Financial Services, over a period of several years, processed through certain brokerage accounts hundreds of transactions that showed red flags associated with shell-company activity and failed to adequately monitor foreign-currency-denominated wire transfers worth tens of billions of dollars that were conducted through its commodities accounts and retail brokerage accounts, FinCEN said.

Shell companies are legally formed corporations, but they can also be used to mask the beneficial ownership of account assets and can make tracking funds more difficult for law enforcement and tax officials. FinCEN issued guidance in 2006 on the money-laundering risks of shell companies.

The broker-dealer’s monitoring system failed to capture critical information about the foreign-currency-denominated wire transfers, including sender and recipient information and the country of origin and destination, FinCEN said.

“Financial institutions must fully evaluate and identify the specific [anti-money-laundering] risks of the business and services they offer to their customers so they can proactively develop and implement an appropriate [anti-money-laundering] program to mitigate those risks,” FinCEN said.

The Finra fine includes $4.5 million against UBS Financial Services for failing to properly oversee billions of dollars in foreign-currency wire transfers and $500,000 against UBS Securities LLC for failing to reasonably monitor “penny stocks” transactions from January 2013 to June 2017.

The bank’s failure to monitor the transactions was discovered in 2012 and UBS failed to put in place a reasonable system until April 2017, Finra said.