SEC Fines Wells Advisors $3.5 Million Over Money-Launder Procedures
(Updates with comment from Wells in seventh paragraph.)
The ongoing scandal at Wells Fargo & Co. extended to its wealth management unit on Monday as the Securities and Exchange Commission imposed a $3.5 million penalty on Wells Fargo Advisors for anti-money-laundering reporting violations.
Without admitting or denying the findings that new managers beginning in March 2012 pressured compliance officials to stop filing suspicious activity reports (SARs) in violation of the Bank Secrecy Act, Wells agreed to the settlement.
The regulator charged Wells with failing to file the reports, or for delaying filings, at least 50 times over 15 months, saying the majority of the violations involved accounts at Wells Advisor branches catering to international customers. The failures related to customers who had previously been the subject of suspicious activity reports.
The SEC attributed the problem to a “new senior manager” appointed in March 2012 in Wells Advisors’ compliance department whose responsibilities included the firm’s anti-money laundering program.
“Shortly after the arrival of new management, the surveillance and investigations group began receiving conflicting and confusing directions on when and whether to file certain SARs,” according to the cease-and-desist order the SEC filed. They were told “they were filing too many SARs,” needed proof—rather than suspicions—of illegal activity and should take steps to eliminate “continuing activity” reviews of accounts previously tagged for suspect activity, it said.
Wells Fargo Advisors’ new compliance management also instructed investigators to avoid documenting “any disagreements with management’s decisions not to file SARs” in the broker-dealer’s internal case management system, the SEC said.
“When confusion over our SAR reporting policies first arose internally, we took immediate steps to conduct an independent review that resulted in process improvements,” spokeswoman Emily Acquits wrote in an e-mail. “We cooperated fully with the SEC’s investigation, and we remain committed to further self-reviews and enhancements that help ensure suspicious activity is disclosed in a timely manner.”
She did not respond to questions about whether the company has disciplined the compliance managers cited by the SEC.
Since news broke last year about Wells Fargo pressuring and incentivizing staff to open checking accounts and credit cards for customers without their knowledge, several bank employees have filed whistle-blowing suits alleging they were fired for calling attention to the issue.
Prior to the arrival of new management, employees in the broker-dealer’s surveillance and investigations group were “recognized…for the quality and increased number” of follow-up reports filed on suspicious activities of previously reported account holders, according to the SEC.
Between July 2012 and June 2013, however, the broker-dealer’s suspicious activity filings plunged by about 60% to an average of 22 per month, the regulator said. Wells had named a new manager to directly supervise the surveillance and investigations group in July 2012, according to the cease-and-desist letter.
Under the federal law, broker-dealers must file reports to the U.S. Treasury Department’s Financial Crimes Enforcement Network on any transactions involving at least $5,000 that they know or have reason to suspect involved illegal activity, were designed to evade the law or involved the use of the broker-dealer to facilitate criminal activity.
Wells Fargo Corp. has said that it faces numerous investigations and lawsuits over disclosure and fake-account violations.
The SEC said it considered the fact that Wells in the summer of 2014 voluntarily hired a third-party compliance firm to review its SAR practices in assessing its sanctions.