By PAUL O’DONOGHUE, Senior Correspondent
FINCEN, the U.S. Treasury’s anti-money laundering agency, has imposed a record $125 million penalty on UBS Financial Services (UBSFS) for what it said were willful violations of the Bank Secrecy Act (BSA).
Additionally, FINRA, the US broker watchdog, has fined UBSFS $20 million over similar issues.
UBSFS, the U.S. broker-dealer of Swiss banking group UBS, previously settled allegations with FinCEN in 2018 with a $14.5 million charge.
The regulator said the latest penalty reflects the firm’s failure to remedy those deficiencies.
FinCEN said the fine is the largest ever imposed on a broker-dealer for breaches of the Bank Secrecy Act (BSA), the main U.S. AML law.
UBS failings
“Despite UBSFS assuring FinCEN that it would soon remediate the underlying issues, UBSFS did not do so,” FinCEN said.
“[It] subsequently failed to appropriately monitor over 50,000 foreign currency wires with an aggregate value of more than $10 billion.”
Regulators said UBS failed to conduct appropriate due diligence of customers, especially high-risk customers with ties to Russia and Latin America.
One, a Russian oligarch with close ties to Russian President Vladimir Putin, allegedly opened and maintained accounts at UBS despite media reports questioning how he amassed his wealth, and linking him to possible money laundering as well as a company “actively invested” in Iranian digital assets.
FinCEN said that UBSFS did not disclose these failings to FinCEN. The regulator said it learned of them “only through a subsequent investigation FinCEN initiated following a regulatory examination”.
It added: “As part of its resolution with FinCEN, UBSFS admits that it willfully violated the BSA, including failing to implement and maintain an AML program, and file suspicious activity reports.”
In a statement, UBS said: “Today’s announcement brings closure to this legacy matter.
“UBS has cooperated fully with its regulators and has made significant investments to remediate and strengthen its AML program in line with leading industry practices.”
UBS FinCEN and FINRA penalties
FINRA also raised the same breaches when announcing its own fine. In December 2018, FINRA also fined UBS Financial $4.5 million for failing to reasonably monitor foreign currency wires.
“Between January 2019 and June 2023, UBS Financial failed to reasonably monitor more than 60,000 foreign currency wires totaling more than $10 billion,” it said.
“In settling this matter, UBS Financial accepted and consented to the entry of FINRA’s findings, without admitting or denying them.”
FinCEN’s consent order requires UBSFS to appoint a third party to conduct a lookback review and identify suspicious transactions that went undetected.
The firm must also undergo an independent review of its AML programme, covering risks related to cartels, Iran, Russia, and Venezuela.
FinCEN said it will “waive up to $15 million” for the expenses incurred by UBSFS in connection with the reviews.
FinCEN Director Andrea Gacki said: “Today’s historic action against UBSFS should send a clear message that recidivist financial institutions will face severe repercussions.
“Financial institutions that continue to violate the BSA jeopardize the integrity of our financial system, especially those that by expose it to high-risk customers and activities without effective controls.”
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