Wells Fargo Advisors can pay $7 million to settle fees with the Securities and Alternate Fee alleging the agency’s anti-money laundering protections fell brief when it didn’t file stories flagging suspicious transactions.
In line with the SEC order, the agency didn’t file at the least 34 Suspicious Motion Experiences in a well timed method between April 2017 and October 2021. The costs and accompanying superb despatched a message to different registrants that “AML obligations are sacrosanct,” based on SEC Enforcement Division Director Gurbir S. Grewal.
“When SEC registrants like Wells Fargo Advisors fail to adjust to their AML obligations, they put the investing public in danger as a result of they deprive regulators of well timed details about potential cash laundering, terrorist financing, or different unlawful cash actions,” he mentioned.
To observe brokerage transactions for suspicious exercise, Wells Fargo’s AML transaction monitoring system catalogued worldwide wire switch exercise. Previous to 2019, the agency’s AML system would accomplish that by cross-referencing nation codes from the Nationwide Geospatial-Intelligence Company and the Worldwide Group for Standardization.
However starting in January 2019, Wells Fargo switched to a brand new model of its AML system. Unbeknownst to the agency on the time, the brand new system failed at correctly cross-referencing these codes for 58 of the 160 high-risk and moderate-risk nations by which Wells Fargo facilitated transactions. This meant the system couldn’t produce alerts for transfers involving these nations.
In line with the SEC, the agency failed to check the brand new system for such an error, and didn’t conduct post-implementation assessments. Between January 2019 and August 2019, the system failed to supply alerts for about 1,708 wire transfers from 20 high-risk and 18 moderate-risk nations, the order acknowledged.
In September of that 12 months, examiners from the Monetary Trade Regulatory Authority performed an annual gross sales apply examination of Wells Fargo and uncovered the error. Wells Fargo started working to repair it in October whereas examiners tried to find out whether or not Wells Fargo would have been required to submit any SARs due to the missed alerts.
An inside Wells Fargo investigation led the agency to file at the least 25 late SARs, with greenback values on the suspicious exercise starting from $29,980 to $2.5 million. A number of of those late stories associated to potential cash laundering and actions between a number of accounts with “no enterprise or obvious lawful goal,” based on the SEC order.
Later that 12 months, the agency uncovered a further unrelated error with its AML system, discovering that from April 2017 by Might 2019, wire switch information was not entered and processed into the system in sure cases, together with on days by which there was a financial institution vacation however not a brokerage vacation. In complete, there have been about 658 alerts that weren’t generated, with the underlying transactions starting from $10,480 to $6.2 million, based on the fee.
In an announcement, a Wells Fargo spokesperson mentioned the agency takes regulatory tasks critically.
“This matter refers to legacy points that impacted a transaction monitoring system and the problems have been resolved promptly upon discovery,” the spokesperson mentioned.
Along with reviewing their AML system as soon as FINRA raised the discrepancy over wire transfers that weren’t flagged, Wells Fargo retained a third-party consulting agency to evaluation their transaction monitoring methods and procedures and offered the agency’s report back to the SEC, based on the order. Along with the $7 million civil penalty, Wells Fargo agreed to a censure, in addition to a stop and desist with out admitting or denying the findings of the report.
In 2017, the SEC settled comparable fees with Wells Fargo Advisors for failing to file at the least 50 SARs between March 2012 and June 2013 that associated to “persevering with suspicious exercise” in accounts on the agency’s U.S. department places of work that centered on worldwide shoppers. Along with a stop and desist and censure, the SEC levied a $3.5 million civil penalty in opposition to Wells Fargo.