The U.S. Department of the Treasury’s Financial Crimes Enforcement Network has assessed a $125 million penalty against UBS Financial Services for repeatedly violating anti-money laundering rules.

The penalty, which UBS has agreed to pay, brings an end to this matter, a UBS spokesperson told FinAi News, adding that the company has cooperated with regulators and strengthened its anti-money laundering (AML) program.

As part of the resolution, UBS admitted that it willfully violated the Bank Secrecy Act (BSA), including failing to implement and maintain an AML program and file suspicious activity reports, according to an Aug. 3 release from the Financial Crimes Enforcement Network.

“Today’s historic action against UBSFS should send a clear message that recidivist financial institutions will face severe repercussions,” Financial Crimes Enforcement Network (FinCEN) Director Andrea Gacki said in the release.

This is the largest penalty imposed against a broker-dealer for BSA violations, the release said.

“We’ve seen much larger AML penalties over the years in the billions of dollars,” Jon Glass, a partner in the financial crimes advisory practice at consultancy SolomonEdwards, told FinAi News. “What stands out to me is that FinCEN called this the largest Bank Secrecy Act penalty ever imposed on a broker-dealer.

“That’s a pretty clear signal to the securities industry,” Glass said.

Prior violations

Zurich-based UBS had agreed to a consent order with FinCEN in December 2018 for BSA violations, paying a penalty of $14.5 million. The 2018 order found that UBS did not adequately monitor foreign currency wires because of internal monitoring weaknesses.

UBS agreed to remediate the issues but failed to appropriately monitor more than 61,500 foreign currency wires worth more than $10.5 billion from January 2019 through June 2023, according to the consent order issued Aug. 3. Additionally, UBS did not disclose these failures to FinCEN, which learned of them through an investigation.

UBS also failed to perform appropriate customer due diligence, which ensures customers are not making money from illegal activities or funding terrorism, FinCEN said. As a result, UBS failed to report hundreds of suspicious transactions.

“This isn’t just about a $125 million penalty,” Glass said. “It’s a reminder that regulators expect institutions to fix problems the first time, not revisit them years later.”

Remediation

The Aug. 3 consent order requires UBS to work with a third party to identify past suspicious transactions and submit suspicious activity reports (SAR). UBS must complete the lookback within six months and then submit the SARs within the following three months.

UBS must also undergo an independent review of its AML program and hire an AML consultant within three months. The consultant must file their report within three months of being hired.

“To deliver a complex transaction-monitoring system in a large, global bank/FI takes at minimum two years, with all hands on deck and total commitment from the board and senior management,” Mary Kirwan, an independent financial crime prevention consultant, told FinAi News. “It can realistically take [more than] three years.”

The 2018 consent order set a remediation deadline of mid-2019, which Kirwan said was unrealistic.

Moving forward, FIs cannot treat remediation as something they can ever truly complete, Glass said. AML and transaction-monitoring processes must be reviewed and enhanced regularly, he said.

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