Morgan Stanley Fined $10 Million by FINRA for AML Violations

FINRA fined Morgan Stanly $10 million after finding it failed to properly supervise an anti-money laundering (“AML”) program over five years because of three major issues:

First, Morgan Stanley’s automated AML surveillance system failed to receive data from several systems. Second, it failed to devote sufficient resources to review alerts generated by its automated AML surveillance system. And third, Morgan Stanley didn’t reasonably monitor customers’ deposits and trades in penny stock for potentially suspicious activity, despite the fact its customers deposited almost 2.7 billion shares of penny stock, which resulted in sales totaling approximately $164 million.

FINRA also concluded that Morgan Stanley failed to establish and maintain a supervisory system that complies with Section 5 of the Securities Act of 1933 which generally prohibits the sale of unregistered securities.

Broker-Dealer AML programs are highly scrutinized and must be accurate. If you have questions regarding the AML requirements, seek competent counsel.

About Kennyhertz Perry’s Financial Services Practice Group

Kennyhertz Perry integrates broad regulatory expertise, including compliance and enforcement, with the transactional practices to which that expertise is critical. We are called upon by businesses who need help navigating current and future regulatory challenges stemming from the global financial crisis. To assist our clients in understanding the issues that will affect their industries, entities and transactions, we understand the impact of regulations and requirements of both The Dodd-Frank Wall Street Reform and Consumer Protection Act and a wide variety of U.S. and foreign regulatory reforms targeting investment business and market structures, alternative investment fund managers, private equity and others, central clearing and exchange-trading of derivatives, market abuse and insider dealing, capital regimes, and commodity derivatives.

Kennyhertz Perry attorneys also have broad BSA/AML experience across the spectrum of bank and non-bank financial institutions. These include traditional chartered banks, broker-dealers, commodity trading advisors, money transmitters, non-bank lenders, and virtual currency businesses. We are experienced in counseling and drafting BSA/AML practices, policies, and procedures. Our combined knowledge and skill permit us to anticipate potential problems before they become serious issues and assist clients in responding effectively to regulatory and law enforcement criticisms or inquiries.

Kennyhertz Perry regularly counsels lenders, investment advisers, broker-dealers, and fund managers on the laws, rules, and regulatory developments affecting their business, including regulatory requirements, risk management, licensing and registration, sales and marketing practices and materials, manuals and training, day-to-day compliance.

To learn more about Kennyhertz Perry, LLC, please visit kennyhertzperry.com.