Key Takeaways:
- SEC announced on May 20 that Wells Fargo’s brokerage unit agreed to pay $7 million to settle charges that it infringed anti-money-laundering rules over a four-year period.
- This is Wells Fargo Advisors’ second Bank Secrecy Act action in the last five years. The regulator issued a settled order against Wells Fargo Advisors in November 2017 for failing to timely file at least 50 SARs.
- Wells Fargo was late in filing suspicious activity reports because the system failed to reconcile different country codes used to monitor foreign wire transfers.
The US Securities and Exchange Commission announced on Friday that Wells Fargo Advisors had charged $7 million to settle anti-money laundering charges.
Wells Fargo Advisors failed to submit at least 34 Suspicious Activity Reports (SARs) on time, according to the regulator, between April 2017 and October 2021.
As per the regulator, this is the second time in the last five years that Wells Fargo Advisors has been penalised for this type of violation.
Wells Fargo has one of the greatest wealth management units in the country, with over 12,000 financial advisors. At the end of the first quarter, the unit had $2 trillion in client assets.
“When SEC registrants, such as Wells Fargo Advisors, fail to comply with their AML obligations, they endanger the investing public by depriving regulators of timely information about potential money laundering, terrorist financing, or other illegal money movements,” said Gurbir S. Grewal, Director of the Securities and Exchange Commission, Division of Enforcement. “By taking this enforcement action, we are not only holding Wells Fargo Advisors accountable, but also sending a strong message to other registrants that AML obligations are sacred.”
According to the SEC, the setback occurred since the broker failed to adequately incorporate and test a new form of its internal anti-money laundering (AML) transaction monitoring and alert system, which was implemented in January 2019.
The system was unable to reconcile the various country codes used to track foreign wire transfers. In trying to settle the case, Wells Fargo Advisors neither conceded nor tried to deny the charges.
“At Wells Fargo Advisors, we take regulatory responsibilities seriously,” a company spokeswoman said in a statement. This issue pertains to legacy issues that impacted a transaction monitoring system, and the issues were promptly resolved upon discovery.”
Broker-dealers are expected to submit SARs for transactions they presume entail deception or fraud or a lack of an evident lawful business purpose under the Bank Secrecy Act and regulations promulgated by the United States Treasury Department’s Financial Crimes Enforcement Network.
Wells Fargo Advisors was chastised for its “deficient implementation” of a new internal anti-money-laundering monitoring system that the firm implemented in January 2019.
The SEC’s order finds that Wells Fargo Advisors, a registered broker-dealer and investment adviser subsidiary of Wells Fargo & Company, violated Section 17(a) of the Securities Exchange Act and Rule 17a-8. In addition to the $7 million penalty, Wells Fargo Advisors consented to a censure and a cease and desist order without admitting or denying the findings.
