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UBS and American Express Fined for Anti-Money Laundering Failures
Confirmed
In Short: UBS Financial Services has been fined $145 million by U.S. regulators for anti-money laundering (AML) failures, with the Financial Crimes Enforcement Network (FinCEN) imposing a $125 million civil money penalty and the Financial Industry Regulatory Authority (FINRA) adding a $20 million fine.
The penalties stem from UBS Financial's failure to adequately assess and mitigate risks associated with high-risk customers, including those with ties to Russia and Latin America.
FinCEN cited specific weaknesses in UBS Financial's transaction monitoring, customer due diligence, and suspicious activity reporting processes.
American Express, meanwhile, has been fined $350 million by U.S. regulators for extensive flaws in its monitoring and reporting systems, which hindered its ability to identify and report approximately $13 billion in suspicious transactions over a decade.
The OCC identified deficiencies in American Express's procedures for confirming customer identities and conducting due diligence checks.
Bank of America also faced a significant fine of $1.2 billion for failing to detect potential money laundering and other illegal activities, impacting its third-quarter earnings.
The settlement with Bank of America reflects 475 apparent violations of sanctions programs, including those on Russia and Iran, narcotics, and global terrorism.
UBS Financial acknowledged full cooperation with regulators and significant investments to strengthen its AML program.
American Express CEO Squeri acknowledged progress in strengthening controls but emphasized the need for further efforts to address identified issues.
Regulators emphasized the importance of financial institutions dedicating sufficient resources to meet AML obligations, especially for institutions of American Express's scale and complexity.
Background
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What's confirmed
- The penalties stem from UBS Financial's failure to adequately assess and mitigate risks associated with high-risk customers, including those with ties to Russia and Latin America.
- FinCEN cited specific weaknesses in UBS Financial's transaction monitoring, customer due diligence, and suspicious activity reporting processes.
- American Express, meanwhile, has been fined $350 million by U.S. regulators for extensive flaws in its monitoring and reporting systems, which hindered its ability to identify and report approximately $13 billion in suspicious transactions over a decade.
- The OCC identified deficiencies in American Express's procedures for confirming customer identities and conducting due diligence checks.
- Bank of America also faced a significant fine of $1.2 billion for failing to detect potential money laundering and other illegal activities, impacting its third-quarter earnings.
- The settlement with Bank of America reflects 475 apparent violations of sanctions programs, including those on Russia and Iran, narcotics, and global terrorism.
- UBS Financial acknowledged full cooperation with regulators and significant investments to strengthen its AML program.
- American Express CEO Squeri acknowledged progress in strengthening controls but emphasized the need for further efforts to address identified issues.
- Regulators emphasized the importance of financial institutions dedicating sufficient resources to meet AML obligations, especially for institutions of American Express's scale and complexity.
What's still developing
- The Financial Crimes Enforcement Network (FinCEN) assessed a $125 million civil money penalty against UBS Financial for willful violations of the Bank Secrecy Act (BSA), marking the largest penalty imposed against a broker-dealer for BSA violations to date.
- Separately, the Financial Industry Regulatory Authority (FINRA) fined UBS Financial $20 million for AML violations.
- The agency said UBS Financial did not sufficiently evaluate factors including source of wealth concerns, adverse media reports and potential links to corruption, fraud and money laundering.
- The regulator cited failures involving customers’ connections to higher-risk jurisdictions, unexplained changes in domicile and employment, adverse media and potential political exposure.
- “Event-driven review is typically where most compliance programs are weakest and it’s the hardest failure to catch because on the surface, everything looks like it’s working,” Nadig told Traders Magazine.
- The regulators said American Express, particularly its national bank, had failed to establish and maintain an effective anti-money laundering compliance programme.
- The penalty followed findings by US banking authorities that the company’s procedures for identifying and reporting suspected money laundering were insufficient, potentially leaving about $13 billion in suspicious transactions undetected over the past decade.
- The settlement amount of $11.6m reflected the determination that Bank of America's apparent violations were "non-egregious", OFAC said.
- The announcement came less 24 hours before Bank of America was due to announce its quarterly earnings on Wednesday morning.
- "Our third-quarter results will include a non-tax-deductible charge of $1.2 billion impacting net income by approximately 17 cents per share," the bank said in an emailed statement.
- The banking giant failed to report over $5bn in suspicious activity to the government, $1bn of which posed national security and illicit finance risks, the Treasury said.
- "We have already dedicated substantial personnel and resources to our ongoing remediation efforts, and those costs are in the current expense base," it added.