by Howard Haykin

UBS Securities and affiliate UBS Financial Services - both subsidiaries of UBS Americas - agreed to pay a combined $15 million in fines to settle FINRA, SEC and FinCEN charges that they failed to establish and implement anti-money laundering (“AML”) programs reasonably designed to monitor certain high-risk transactions in customer accounts – including foreign currency wire transfers and penny stock transactions. The $15Mn pot will be evenly split among the 3 regulators.

UBS Financial Services ("UBSFS"), a Weehawken, NJ-based FINRA member, is a full service broker-dealer providing securities and commodities brokerage, investment advisory, and asset management services to retail and institutional clients. It has some  597 branch offices and employs approximately 12,590 registered individuals and 13,880 non-registered fingerprint persons.

UBS Securities (“UBSS"), a New York, NY-based FINRA member, provides investment banking, research, and securities trading primarily to institutional clients. It has 21 branch offices and employs approximately 1,808 registered individuals and 8,385 nonregistered fingerprint persons

WHAT WENT WRONG AT UBSFS.    From January 2004 to April 2017, UBSFS processed thousands of foreign currency wires for billions of dollars, without sufficient oversight. UBSFS’s failure to monitor these high-risk transactions went undetected for more than 8 years until discovered in 2012, and the firm failed to implement a reasonable system until April 2017.

UBSFS’s AML surveillance systems failed to reasonably monitor billions of dollars in foreign currency wires flowing through customer accounts, including hundreds of millions of dollars in foreign currency wires to and from countries known to be at high risk for money-laundering. For example, for foreign currency wires to and from certain accounts, UBSFS’s AML surveillance systems did not capture: (i) the number and identity of customers; (ii) the number and dollar value of the transfers; (iii) whether the transfers involved 3^rd parties; and, (iv) whether the transfers involved countries known for money-laundering risk.

WHAT WENT WRONG AT UBSS.    From January 2013 to June 2017, UBSS failed to reasonably monitor penny stock transactions that its Swiss parent routed to UBSS for execution through an omnibus account. During this time, UBSS facilitated the purchase or sale of more than 30 billion shares of penny stocks valued at over $545 million through the omnibus account for undisclosed customers.

UBSS’s policies and procedures failed to collect basic information – e.g., the identity of the stock's beneficial owner, the beneficial owner's relationship with the issuer, or how the seller obtained the stock. While the firm relied on automated surveillance systems to identify potential AML red flags, UBSS nonetheless facilitated transactions in securities that appeared to be subject to "pump and dump" schemes or other forms of potential manipulation or fraud.

[For further details, click on FINRA AWC #2012034427001.]