Wells Fargo Advisors has agreed to pay $3.5 million to the Securities and Exchange Commission (SEC) to settle charges that it failed to file a number of suspicious money movements within US branches that focused on international customers.
The firm agreed to the settlement without admitting or denying the watchdog’s findings that in 2012 new management of the firm’s anti-money laundering (AML) program ‘created confusion’ within the firm’s compliance team, which led Wells Fargo to file Suspicious Activity Reports (SARs) late - or not at all - at least 50 times over 11 months.
Under the Bank Secrecy Act broker-dealers like Well Fargo must file SARs to report suspicious transactions that occur through their firms in order to help detect potential violations of the securities laws and other money laundering violations.
According to the SEC, compliance officers working within the firm’s Surveillance and Investigations Group, which files SARs, were told they were filing too many reports by the new management.
They also were told that reviews of ‘continuous activity’ on previously-filed SARs were not a regulatory requirement and to stop further reviews, as well as that filing a report required ‘proof’ of illegal activity.
The management also instructed investigators to avoid documenting ‘any disagreements with management’s decisions not to file SARs’ in the firm’s internal case management system, the SEC said in its order.
The order, released on November 13, said: ‘All of these statements by the new AML management, many of which were communicated more than once to the Surveillance and Investigations group, created an environment in which the Surveillance and Investigations group experienced difficulty in recommending and filing SARs, especially continuing activity SARs.’
Ultimately, the regulator found Wells Fargo Advisors’ total SAR filings dropped by approximately 60% from July 2012 to June 2013.
After an employee complaint in 2013 Wells Fargo carried out an internal investigation with the assistance of an outside law firm and hired a third-party AML compliance firm in 2014 to conduct a review. It then filed a number of suspicious activity reports long after the deadlines for reporting such incidents, as established by the regulator, had expired.
'Without admitting or denying the SEC’s findings, Wells Fargo Advisors consented to a cease-and-desist order, a censure, and a civil penalty of $3.5 million,' the summary of the administrative processings said. 'Wells Fargo Advisors also voluntarily undertakes to review and update its policies and procedures and develop and conduct additional training.'
A spokesperson from Wells said: ‘We take these critical responsibilities seriously. When confusion over our SAR reporting policies first arose internally, we took immediate steps to conduct an independent review that resulted in process improvements.
‘We cooperated fully with the SEC's investigation, and we remain committed to further self-reviews and enhancements that help ensure suspicious activity is disclosed in a timely manner.’