SEC Fines Wells Fargo $3.5 Million For Failed Client Account Oversight

The Securities and Exchange Commission fined Wells Fargo Advisors $3.5 million for “willfully” failing to report or follow up on 50 cases of suspicious wire and deposit activity in clients’ accounts.

The SEC found that between March 2012 and June 2013 the embattled firm failed to file suspicious activity reports (SARs) and follow up on investigations into initial suspicious wire and deposit activity. Wells Fargo Advisors also failed to close client accounts, as anti-money laundering laws and Wells Fargo’s own compliance manuals required it to do, according to the SEC.

The fine and a cease-and-desist order were part of a consent agreement between the SEC and the company.

Beginning in March 2012, new compliance managers overseeing anti-money-laundering efforts at Wells Fargo Advisors began telling their in-house investigators that they were filing too many SARs, didn’t need to file follow-up reports on original investigations and needed “proof of illegal activity” to file a report, the SEC stated.

The investigators were also told to refrain from documenting disagreements with managers when SARs weren’t filed and “to record only facts and managements’ final decisions” in Wells Fargo Advisors’ internal case management system, the SEC stated.

“We take these critical responsibilities seriously,” a Wells Fargo spokesperson told Financial Advisor magazine. “When confusion over our SAR reporting policies first arose internally, we took immediate steps to conduct an independent review that resulted in process improvements. We cooperated fully with the SEC’s investigation, and we remain committed to further self-reviews and enhancements that help ensure suspicious activity is disclosed in a timely manner.”

The Bank Secrecy Act requires broker-dealers to file SARs with the Treasury Department to report transactions of at least $5,000 that the B-D suspects involve funds derived from illegal activity; are designed to evade BSA requirements or have no business or apparent lawful purpose after examining the available facts.

“Despite these requirements, Wells Fargo Advisors failed to file or timely file at least 50 SARs, a majority of which related to continuing suspicious activity occurring in accounts held at Wells Fargo Advisors’ U.S. branch offices that focused on international customers,” the SEC stated in its cease-and-desist order.

Before March 2012, Wells Fargo “recognized members of the surveillance and investigations group for the quality and increased numbers of SARs” filed by the compliance team, the SEC stated.

After installing new compliances managers, members of Wells Fargo Advisors' surveillance and investigations group began “receiving conflicting and confusing directions on when and whether to file certain SARs, especially regarding when and whether to file continuing activity SARs,” the SEC stated.

Without admitting or denying the SEC’s findings, Wells Fargo Advisors consented to a cease-and-desist order, a censure and a civil penalty of $3.5 million.