Wells Fargo fined $1.5 million for AML failures

The firm failed to properly vet some 220,000 new client accounts, Finra said

Dec 18, 2014 @ 10:01 am

By Mason Braswell

The Financial Industry Regulatory Authority Inc. slapped Wells Fargo Advisors with a $1.5 million fine for failing to comply with anti-money laundering requirements.

Over the course of nine years from 2003 to 2012, the firm failed to properly vet some 220,000 new customer accounts by doing the necessary identity verification, Finra said.

The error was the result of a “design flaw” in the firm's transaction processing system, according to a statement from the regulator. The system sometimes assigned old client identifiers from closed accounts to new customer accounts, which meant the firm's client verification program did not recognize that a new account had been opened and needed to be verified, according to Finra.

(More: Finra accuses indie B-D of falling down on anti-money laundering supervision requirements)

The 220,000 accounts represented more than 3% of the 6.9 million accounts opened at Wells Fargo Advisors during that time, Finra said.

As part of Finra's anti-money laundering compliance requirements, firms must maintain a customer identification program that collects and verifies information about who is opening an account.

Wells Fargo accepted the fine without admitting or denying the allegations.

The allegations applied to both Wells Fargo Advisors' private client group and its independent network, Wells Fargo Advisors Financial Network. The firm currently has around 15,200 brokers and advisers across both channels.

“While the firms eventually discovered the flaw in their own systems, it took far too long,” said Brad Bennett, Finra's chief of enforcement, in a statement.

Wells Fargo discovered the problem in January 2012 and corrected it, according to Finra. The firm ultimately prohibited further activity in 345 accounts where it could not complete identity verification.

In a separate case, the firm disclosed this summer on its BrokerCheck record that it had received a Wells Notice from Finra advising the firm of a possible enforcement action for additional anti-money laundering violations.

A spokesman for Wells Fargo, Anthony Mattera, declined to comment on the Finra fine or the new case.


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