The US Financial Crimes Enforcement Network has announced an assessment against UBS Financial Services for wilfully breaking the Bank Secrecy Act

FinCEN assessed a $14.5 million civil money penalty, of which $5 million will be paid to the US Department of the Treasury and the remainder will be concurrent with penalties for similar or related conduct imposed by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).

FinCen states in its assessment that UBSFS failed to develop and implement an appropriate, risk-based anti-money laundering (AML) plan of action or 'programme' that adequately addressed the risks associated with accounts that included both traditional brokerage and banking-like services.  UBS, it says, failed to implement appropriate policies and procedures to ensure the detection and reporting of  suspicious activity through all accounts, particularly for those accounts that exhibited little to no securities trading. The firm did not adequately structure its AML programme to address the use of securities accounts for the purpose of moving funds rather than trading securities. 

UBS, according to the regulator, failed to provide enough resources to ensure that it complied with AML regulations every day. Inadequate staffing led to a significant backlog of alerts and made it less able to send off suspicious activity reports (SARs) on time.
 
Over several years, UBS processed hundreds of transactions through certain of its brokerage accounts that exhibited 'red flags' that FinCen associates with shell company activity.  UBS was bad at monitoring wire transfers denominated in foreign currencies that amounted to tens of billions of dollars that were conducted through its commodities accounts and retail brokerage accounts.  UBS’s AML monitoring system failed to spot crucial information about these wire transactions, including information about senders and recipients and the countries of origin and destination.  As a result, it was unable to identify and investigate potentially suspicious transactions in accordance with the presence of important risk factors, such as jurisdiction and the involvement of politically exposed persons or PEPs.

As a full-service broker-dealer, UBSFS offers securities and commodities brokerage services, investment products, advisory services, portfolio management products and services and execution
and clearance services for transactions originated by HNW investors. It reported total assets of more than $17 billion for the year ending 31 December 2017. UBSFS is a wholly-owned
subsidiary of UBS Americas Inc, which is an indirect subsidiary of UBS Group AG.

FinCEN has determined that, between 2004 and April 2017, UBSFS flouted its AML obligations under 31 USC s5318(h) and 31 CFR s1023.210 (parts of the US code and the Code of Federal Regulations) on purpose, along with its obligation under s312 of the USA PATRIOT Act to "conduct ongoing due diligence" on correspondent accounts for foreign financial institutions.

In 2006 FinCEN identified the following as common money-laundering 'red flags' associated with shell companies.

• Payments have no stated purpose, do not refer to goods or services, or identify only a contractor invoice number.
• The company’s purported goods and services do not match its profile that the financial institution ought to have built up from information that it had already received from that firm.
• Transacting businesses share the same address, provide only a registered agent’s address, or raise other address-related inconsistencies.
• An unusually large number and variety of beneficiaries receive wire transfers from one company.
• Beneficiaries located in highly risky, offshore financial centres are involved.
• There are multiple high-value payments or transfers with no apparent legitimate business purpose.

Both the Miami and San Diego branches of UBSFS had plenty of foreign HNW clients, many of whom used their accounts to conduct a high volume of money movements with minimal trading in securities. FinCEN thinks that this is another example of the firm’s failure to account for a higher-risk category of customer using securities accounts for the purpose of moving funds rather than for trading purposes.