Morgan Stanley Smith Barney has agreed to the imposition of a $10 million fine for lapses in its anti-money laundering program, the Financial Industry Regulatory Authority announced Wednesday.
The lapses in the program occurred between 2011 and 2016, and also involved a lack of supervision by Morgan Stanley, Finra said. Morgan Stanley did not admit or deny guilt in reaching the settlement.
Morgan Stanley said, “We are pleased to have resolved this matter from several years ago. We continuously work to strengthen our controls and have been recognized by Finra for the extraordinary steps we have taken to expand and enhance our anti-money laundering program.”
Finra said Morgan Stanley’s anti-money laundering program did not receive critical data from several systems, undermining the firm’s surveillance of tens of billions of dollars of wire and foreign currency transfers, including transfers to and from countries known for having high money-laundering risk.
The financial giant also failed to devote sufficient resources to review alerts generated by its automated anti-money laundering surveillance system, and consequently Morgan Stanley analysts often closed alerts without sufficiently conducting or documenting their investigations of potentially suspicious wire transfers.
Finally, Morgan Stanley’s anti-money laundering department did not reasonably monitor customers’ deposits and trades in penny stock for potentially suspicious activity, despite the fact that its customers deposited approximately 2.7 billion shares of penny stock, which resulted in subsequent sales totaling approximately $164 million during that time period.
Finra said Morgan Stanley failed to implement its 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.