Frauds & Scandals | |
Frauds & Scandals | |
4072 VIEWS | |
![]() |
Thursday, December 27, 2018
03:14AM / By FINRA
FINRA announced today
that it has fined Morgan Stanley Smith Barney LLC $10 million for anti-money
laundering (AML) program and supervisory failures that spanned a period of more
than five years.
FINRA found that Morgan
Stanley’s AML program failed to meet the requirements of the Bank Secrecy Act
because of three shortcomings:
FINRA also found that
Morgan Stanley failed to establish and maintain a supervisory system reasonably
designed to comply with Section 5 of the Securities Act of 1933, which
generally prohibits the offer or sale of unregistered securities. In
particular, Morgan Stanley divided responsibility for vetting its customers’
deposits and sales of potentially unregistered penny stock among its branch
management and two home office departments without reasonable coordination
among them.
Instead, the firm
primarily relied on its customers’ representations that the penny stock they
sought to deposit was not restricted from sale, and the representations of
issuers’ counsel that the customers’ sales complied with an exemption from the
registration requirements. As a result, Morgan Stanley failed to reasonably
evaluate the customers’ penny stock transactions for "red flags"
indicative of potential Section 5 violations.
Moreover, FINRA found
that Morgan Stanley failed to implement policies, procedures, and controls to
ensure that it conducted risk-based reviews on a periodic basis of the
correspondent accounts it maintained for certain foreign financial
institutions.
“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. “Firms must ensure that their AML programs are reasonably designed
to detect and cause the reporting of potentially suspicious activity.”
This matter arose out of
firm examinations and cause examinations referred to FINRA’s Department of
Enforcement by FINRA’s AML Investigations Unit.
In determining the
appropriate monetary sanction, FINRA considered extraordinary corrective
measures Morgan Stanley took to expand and enhance its AML-related programs,
including that it devoted substantial resources to increase its staffing,
improve its automated transaction monitoring system, and revise its policies
and procedures.
In settling this matter,
Morgan Stanley neither admitted nor denied the charges, but consented to the
entry of FINRA’s findings.
Related
News
1. McKinsey Asked To Explain Dual Roles In Bankruptcy Case; Faces a Perilous Fight
2. JPMorgan To Pay More Than $135m For Improper Handling Of ADRs - SEC
3. FINRA Sanctions Morgan Stanley
$13m In Fines And Restitution – Sept 25, 2017
4.
FINRA bars Broker for
Unethical Conduct and Assisting Friend in Deceiving Creditors – Apr
25, 2016
5.
FINRA Publishes Report On
Selected Cybersecurity Practices At Securities Firms – 2018 – Dec
21, 2018
6.
Merrill Lynch Fined $6M For
Selling IPOs To Industry Insiders - IPOs Include FB, GM, Twitter, Linked
7.
Italy Judge Says Evidence
Shows Eni, Shell Knew of Nigerian Graft
8.
What Does It Mean That
Independent Directors Accuse Diamond Bank Of Corporate Governance Issues?
9.
SEC Halts Alleged Insider
Trading Ring Spanning Three Countries
10. Deutsche Bank Offices Are
Searched in Money Laundering Investigation
11.
Nigeria’s Infrastructure
Racket – Frauds, Corruption and Shallowness
12. Whistleblowing - New Rules,
New Policies, New Vision – A Speech by John Price, Commissioner, ASIC
13. Governance Issues Around The
48th AGM of NEM Insurance Plc – Investigation and Outcomes
14. SEC Adopts Rules That Increase
Information Brokers Must Provide To Investors On Order Handling
15.
SEC Updates List Of Firms
Using Inaccurate Information To Solicit Investors
16. UK Government Launches First
Public-Sector Counter Fraud Profession