The Financial Industry Regulatory Authority announced that it has fined UBS Financial Services Inc. $20 million over violations in its anti-money laundering (AML) program.
In a news release, FINRA said it found that UBS Financial failed to establish and implement an AML compliance program reasonably expected to detect and cause the reporting of suspicious transactions involving foreign currency wires, which allow customers to send and receive foreign currency.
It was also determined that UBS Financial did not reasonably implement its customer due diligence program with respect to certain retail customers and failed to timely detect and report suspicious money movements by those customers.
“Member firms operating in global markets bear a responsibility to design and implement AML programs that are tailored to their business model and capable of reasonably monitoring transactions for potentially suspicious activity,” said FINRA’s Executive Vice President and Head of Enforcement, Bill St. Louis. “This action underscores FINRA’s approach to progressive discipline, which includes escalating sanctions for recidivist misconduct.”
UBS Financial has been the subject of previous disciplinary action over its anti-money laundering deficiencies. The firm was fined $4.5 million by FINRA in 2018 for failing to reasonably monitor foreign currency wires.
FINRA found during a subsequent routine examination that UBS Financial failed to remediate those foreign currency wire monitoring violations. As a result, the firm’s AML program failures related to foreign currency wires persisted through June 2023.
?Between January 2019 and January 2021, UBS Financial continued to use the unreasonable legacy monitoring system that was the subject of the member firm’s 2018 settlement,” FINRA stated. “This system included a quarterly manual review of a report that contained thousands of foreign currency wires, which did not reasonably allow for the identification of suspicious or unusual patterns and often failed to include material information related to the geographic locations at issue.”
UBS implemented an automated transaction monitoring tool in February 2021 but due to an incomplete data file and labeling change, the tool omitted a significant percentage of the firm’s activity. This omitted activity included approximately 33% of foreign currency wires in retail customer accounts approved to engage in foreign currency spot activity.
Between January 2019 and June 2023, UBS Financial allegedly failed to supervise more than 60,000 foreign currency wires totaling more than $10 billion. The wires involved numerous red flags, including high-risk geographic locations, excessive transfers, unusually large dollar amounts, no apparent business purpose and instances where the same accounts had previously been flagged for suspicious activity, according to FINRA.
UBS between 2019 and 2022 also failed to properly implement a customer diligence program for clients with certain risk factors. These factors included customers’ connections to higher risk geographic locations, including Russia, unexplained changes in domicile and employment, material adverse media, and potential political exposure.
This led UBS Financial to incorrectly assign and maintain lower risk ratings for those customers, resulting in less scrutiny of their transaction activity. As a result, UBS Financial did not detect and report certain suspicious transactions involving money movements.
In settling this matter, UBS Financial accepted and consented to the entry of FINRA’s findings, without admitting or denying them.
“Today’s announcement brings closure to this legacy matter. UBS has cooperated fully with its regulators and has made significant investments to remediate and strengthen its AML program in line with leading industry practices,” a UBS spokesperson said.
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