The United States government has imposed a record $125 million civil penalty on UBS Financial Services Inc. after the financial services giant admitted to willfully violating federal anti-money laundering requirements.
The Financial Crimes Enforcement Network (FinCEN), an agency of the U.S. Department of the Treasury, announced the enforcement action on August 3, describing UBS as a repeat offender under the Bank Secrecy Act. It is the largest civil penalty FinCEN has imposed on a broker-dealer for violations of the law.
According to FinCEN, UBS Financial Services failed to maintain an effective anti-money laundering programme and did not properly report suspicious transactions despite warning signs involving some high-risk customers.
One of the most significant failures involved the monitoring of foreign-currency transactions. Regulators found that UBS inadequately monitored more than 61,000 foreign-currency wire transactions worth over $10 billion. The deficiencies persisted even though similar problems had contributed to an earlier enforcement action against the company.
FinCEN also identified weaknesses in UBS’s handling of customers considered particularly vulnerable to money-laundering risks, including clients with links to Russia and Latin America.
In one case cited by regulators, a Russian oligarch with close ties to Russian President Vladimir Putin was allegedly permitted to remain a beneficiary of UBS accounts despite public reports raising questions about the origins of his wealth and possible money-laundering concerns. Regulators also pointed to information involving a company invested in Iranian digital assets.
The latest action is particularly significant because UBS Financial Services had previously faced sanctions over similar deficiencies. FinCEN imposed a $14.5 million penalty against the company in December 2018 for Bank Secrecy Act violations, including weaknesses in its monitoring of foreign-currency transactions.
FinCEN Director Andrea Gacki said the new enforcement action was intended to demonstrate the consequences facing financial institutions that repeatedly fail to comply with anti-money laundering requirements.
Under the latest resolution, UBS Financial Services must also engage an independent consultant to examine its anti-money laundering programme and conduct additional reviews for potentially unreported suspicious transactions.
The review will give particular attention to illicit-finance risks involving the U.S.-Mexico border, drug cartels and narcotics trafficking, as well as transactions associated with Iran, Russia and Venezuela.
UBS said it cooperated fully with regulators and had made significant investments to strengthen its anti-money laundering controls in line with industry practices.
The $125 million assessment also resolves related regulatory matters involving the Securities and Exchange Commission, Commodity Futures Trading Commission and Financial Industry Regulatory Authority. Under the FinCEN consent order, $48 million in payments to those regulators will be credited against the overall penalty, while $62 million is payable directly to the U.S. Treasury. Another $15 million is subject to provisions tied to qualifying compliance expenditures.
