UBS has agreed to pay $125 million in a coordinated resolution with four federal regulators after officials found the firm failed to fix anti-money-laundering gaps it had promised to remediate nearly a decade earlier.
The penalty from the Treasury Department's Financial Crimes Enforcement Network is the largest ever imposed on a broker-dealer for Bank Secrecy Act violations.
FinCEN's historic penalty landed the same morning FINRA and the Securities and Exchange Commission disclosed their own settlements with the firm, each carrying a $20 million fine, and the Commodity Futures Trading Commission announced a separate $8 million penalty. Those amounts are already part of the $125 million announced by FinCEN.
Unlike the FINRA and SEC matters, which UBS Financial settled without admitting or denying the findings, the firm admitted in its FinCEN consent order that it willfully violated the Bank Secrecy Act, including by failing to implement and maintain an adequate AML program and to file suspicious activity reports.
FinCEN Director Andrea Gacki said the action against UBS Financial should set a clear example to firms, showing that recidivist financial institutions will face severe consequences.
“Repeat violators of the Bank Secrecy Act jeopardize the integrity of our financial system, especially those that expose it to high-risk customers and activities without effective controls,” Gacki said Monday.
This marks FinCEN's second enforcement action against the firm. In December 2018, UBS paid a $14.5 million penalty tied to weaknesses in its automated wire-monitoring system, and gave assurances to FinCEN that it would remediate the issues.
According to FinCEN, the firm did not follow through on that promise, and subsequently failed to appropriately monitor more than 50,000 foreign currency wires worth over $10 billion – failures the Treasury Department sub-bureau says it did not disclose as the agency learned of them only through its own investigation following a regulatory exam.
FINRA's parallel order lays out how those monitoring failures played out operationally. Between January 2019 and January 2021, the firm relied on a quarterly manual report to flag suspicious currency wires – a process FINRA said was not designed to catch unusual patterns and often lacked key geographic details.
A new automated tool rolled out in February 2021 then missed roughly a third of retail foreign-currency-spot activity due to a data file error and a labeling change, according to FINRA. In total, the broker-dealer regulator found the firm failed to reasonably monitor more than 60,000 wires totaling over $10 billion between January 2019 and June 2023.
FinCEN's release points to a broader customer due diligence failure than the FINRA and SEC orders describe, citing gaps in UBS Financial's handling of high-risk customers with ties to Russia and Latin America.
The agency said its investigation found instances where the firm failed to adequately weigh money-laundering risks tied to those customers' source of wealth, including cases involving negative media reports of alleged corruption, fraud, or money laundering. In at least one case, the firm reportedly continued doing business with a customer despite an internal UBS affiliate raising its own concerns due to adverse news about them.
The SEC's order provides additional detail at the individual account level. In one case, a financial advisor knew a customer had previously worked in Russia but did not log that fact in the client's source-of-wealth profile at onboarding, an omission that kept the account at a lower risk rating and delayed scrutiny of a wire later tied to a sanctioned individual. In another, a customer who relocated to Russia in 2014 continued receiving wires from a Russian bank account for years – those wires ultimately added up to $2.3 million – without a corresponding update to his risk profile.
"These wire transfers into the customer’s UBSFS accounts from a high-risk jurisdiction were inconsistent with the customer’s stated account profile and expected pattern of account activity," the SEC order read.
FinCEN's consent order requires UBS Financial to complete a third-party lookback to identify suspicious transactions that went undetected, along with an independent review of its AML program focused on priority risk areas including the U.S. Southwest border and narcotics trafficking, Iran, Russia, and Venezuela.
Notably, FinCEN said it will waive up to $15 million of the costs UBS incurs on that undertaking if the review and remediation are completed to its satisfaction – an incentive structure the agency framed as encouraging meaningful investment in compliance rather than a check-the-box exercise.
"Today’s announcement brings closure to this legacy matter," a spokesperson for UBS told InvestmentNews via email. "UBS has cooperated fully with its regulators and has made significant investments to remediate and strengthen its AML program in line with leading industry practices."
FinCEN credited cooperation from the Commodity Futures Trading Commission, the SEC, and FINRA in reaching the resolution.
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