US Regulators Probe Morgan Stanley's Wealth Operations – Media

Editorial Staff 15 April 2024

US Regulators Probe Morgan Stanley's Wealth Operations – Media

A cluster of US regulators are reportedly checking into the measures Morgan Stanley has taken to verify wealthy clients' identities.

Morgan Stanley shares slipped late last week, extending losses on Thursday after a Wall Street Journal report said that US regulators are scrutinsing its efforts to prevent potential money laundering by wealthy clients.

The Securities and Exchange Commission, the Office of the Comptroller of the Currency and other Treasury Department offices are examining whether Morgan Stanley has taken sufficient steps to probe identities of wealthy clients, the WSJ said, quoting unnamed sources.

On Thursday last week, shares in the bank fell by as much as 5 per cent at one point. They were down on Friday.

The report said the US Federal Reserve had already been checking the matter in 2023.

Morgan Stanley declined to comment to this news service when asked about the story.

The SEC and the Treasury’s Financial Crimes Enforcement Network have sought information on certain clients outside the US who have raised red flags and the bank’s policies to address it, the news organisation said.

In particular, the SEC wants to know why the bank did business with people who had been cut off by E*Trade, the digital-trading platform which the company acquired.

At a time when the US has sanctions on Russians and certain other countries, and has enacted the Corporate Transparency Act (January 2024), focusing on know-your-client and anti-money laundering controls is still crucial. Compliance remains a hot issue. At the start of January, the US introduced the Corporate Transparency Act, which significantly increases disclosure obligations on beneficial owners of corporate entities.

As the reports noted, Morgan Stanley's wealth management business is significant. The wealth arm is a major source of its revenue.

Last year, the firm wrapped up its integration of brokerage firm E*Trade, which it had bought in 2020. Morgan Stanley competes against the likes of Bank of America’s Merrill business and UBS, among others. The US firm reported fourth-quarter 2023 full-year results here.

In mid-February, reports said Morgan Stanley intends to cut several hundred jobs in its wealth management division, coming as new CEO Ted Pick aims to control costs.  

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