UBS Hit with $125M in Fines for AML Violations
Three U.S. regulators announced separate financial penalties Monday against UBS Financial Services for anti-money laundering violations involving foreign currency wire monitoring and customer due diligence failures that persisted from January 2019 through June 2023.
UBS Financial will pay $125 million for penalties levied by the Department of the Treasury’s Financial Crimes Enforcement Network, the Financial Industry Regulatory Authority, and the Commodity Futures Trading Commission. The charges also include stipulations that the Zurich-based bank’s wealth management division works with a third party to address its anti-money-laundering procedures.
According to FinCEN, the civil penalty UBS is paying is for willful violations of the Bank Secrecy Act, an anti-money-laundering and counter-terrorism-financing law. The fine is the regulatory body’s largest to date and includes charges of $20 million and $8 million from FINRA and the CFTC, respectively, according to a consent order.
“Today’s historic action against UBSFS should send a clear message that recidivist financial institutions will face severe repercussions,” FinCEN Director Andrea Gacki said in a statement. “Repeat violators of the Bank Secrecy Act jeopardize the integrity of our financial system, especially those that expose it to high-risk customers and activities without effective controls.”
The fine is FinCEN’s second enforcement action against UBS after a December 2018 civil money penalty of $14.5 million. This follow-up fine comes after FinCEN ruled that UBS did not “remediate the underlying issues” and “subsequently failed to appropriately monitor over 50,000 foreign currency wires with an aggregate value of more than $10 billion.”
The Washington, D.C.-based regulator also ruled that UBS failed to perform appropriate due diligence on “high-risk customers” with ties to Russia and Latin America.
In the FinCEN settlement, UBS’s wealth management division admitted that it violated the Bank Secrecy Act, “including failing to implement and maintain an AML program, and file suspicious activity reports,” according to the announcement.
The order on Monday also requires UBS to work with a third party on a “lookback” to identify and report any suspicious transactions that went undetected and undergo a review of its anti-money laundering program.
If UBS shows it has completed that process, FinCEN will waive up to $15 million of the charges to cover expenses, the regulator wrote.
“Today’s announcement brings closure to this legacy matter,” a UBS spokesperson wrote via email. “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.”
FINRA, CFTC Too
In separate announcements, financial regulators FINRA and the Commodity Futures Trading Commission announced their penalties against UBS.
FINRA, which operates under the oversight of the Securities and Exchange Commission, said the fine represents an escalation from a December 2018 penalty of $4.5 million, which UBS allegedly failed to remediate again, according to FINRA.
“Member firms operating in global markets bear a responsibility to design and implement AML programs that are tailored to their business model and capable of reasonably monitoring transactions for potentially suspicious activity,” Bill St. Louis, executive vice president and head of enforcement at FINRA, said in a statement.
UBS accepted and consented to FINRA’s findings without admitting or denying them.
FINRA’s fine follows a much smaller, $275,000 charge FINRA levied against RBC Capital Markets in July. In that case, FINRA wrote that the firm had lapses in its anti-money laundering procedures that could have resulted in the firm missing suspicious transactions between February 2016 and September 2023.
In March, Sanctuary Wealth’s broker/dealer subsidiary settled with FINRA for allegations of falling short of anti-money laundering precautions. The registered investment advisors broker/dealer, Sanctuary Securities, settled the case for $150,000.
In the UBS case, FINRA charged the bank with using an unreasonable legacy monitoring system through January 2021, which included a quarterly manual review of thousands of foreign-currency wires. FINRA also wrote that UBS failed to reasonably implement its customer due diligence program and incorrectly assigned lower risk ratings to certain retail customers with connections to higher-risk geographic locations, including Russia.
The CFTC, for its part, wrote that UBS Financial failed to “diligently supervise the configuration and operation of its anti-money laundering transaction monitoring systems for wire transfers denominated in foreign currencies.”
Last week, UBS announced a new $3 billion share buyback program in its second-quarter earnings last week, citing a period in which wealth management assets beat estimates and trading revenue surged.
