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- Failed to monitor over 50,000 foreign currency wire transfers in total exceeding $10 billion.<\/li>\n\n\n\n
- Lack of Customer Due Diligence<\/a> (CDD) for high-risk clients, including customers with links to higher-risk countries such as Russia and Latin America, for example.<\/li>\n\n\n\n
- Did not properly assess sources of wealth and keep track of adverse media relating to higher-risk clients.<\/li>\n\n\n\n
- Late reporting of various suspicious transactions that should have been brought to the attention of law enforcement.<\/li>\n\n\n\n
- Failure to remediate known AML control deficiencies found during the previous 2018 settlement.<\/li>\n<\/ul>\n\n\n\n
As a result, FinCEN requested that UBS Financial Services should take on an independent review of its AML program. They needed to carry out a look-back to identify and report any suspicious activity that poor protocols failed to catch.<\/p>\n\n\n\n
The Biggest Compliance Failures of UBS Financial Services<\/h2>\n\n\n\n
The UBS AML fine’s bigger message here is around remediation<\/a> of poor AML controls and systems. FinCEN emphasized that UBS was a repeat offender. US regulators saw key weaknesses for years after the first instance, despite assurances UBS Financial Services would improve monitoring controls. This allowed high-risk activity to go undetected.<\/p>\n\n\n\n
This enforcement demonstrates how there is a growing expectation with global and US regulators that financial institutions need to identify weaknesses in their systems. They also require firms to show how their remediation programs are properly implemented, validated, and continuously monitored.<\/p>\n\n\n\n
Compliance Takeaways from UBS Financial Services<\/h2>\n\n\n\n
There are many important compliance lessons to take away from this collective enforcement action against UBS Financial Services. All regulated firms must take into consideration the following takeaways:<\/p>\n\n\n\n
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- Remediation must be showcased:<\/strong> Regulatory commitments need measurable improvements instead of some sort of implementation plan alone.<\/li>\n\n\n\n
- Monitoring requires continuous optimization:<\/strong> Legacy monitoring systems and poor data handling causes gaps in compliance systems.<\/li>\n\n\n\n
- CDD is an ongoing obligation:<\/strong> Risk assessments need to grow and chance based on customer activity and external risk indicators.<\/li>\n\n\n\n
- Governance is important: <\/strong>There needs to be thorough oversight of AML processes. Governance teams must escalate any raised concerns promptly.<\/li>\n\n\n\n
- Repeat deficiencies bring harsher enforcement:<\/strong> US regulators increase penalties when financial institutions such as UBS Financial Services do not address any previous issues or weaknesses.<\/li>\n<\/ul>\n\n\n\n
What Happens Next?<\/h2>\n\n\n\n
UBS Financial Services needs to complete an independent review and conduct a retrospective review of historical transactions. The retrospective review will identify suspicious activity that the deficiencies may have missed. In turn, FinCEN may waive up to $15M of the penalty<\/a> if UBS completes the necessary actions and implements recommendations. Repeated AML weaknesses attracts a lot of scrutiny, especially if previous remediation commitments have not been met.<\/p>\n\n\n\n
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<\/a><\/figure>\n\n\n\n - Monitoring requires continuous optimization:<\/strong> Legacy monitoring systems and poor data handling causes gaps in compliance systems.<\/li>\n\n\n\n