The U.S. Financial Crimes Enforcement Network (FinCEN) on Monday imposed a $125-million monetary penalty on UBS Financial Services (UBSFS) for willful violations of the Bank Secrecy Act, concluding that the brokerage repeated monitoring failures it had promised to fix under a 2018 settlement. 

FinCEN found that, from January 2019 through June 2023, UBSFS failed to adequately monitor more than 61,500 foreign currency wires with an aggregate value of more than $10.5 billion, according to a consent order. The bureau also determined the firm failed to file timely and accurate suspicious activity reports on hundreds of transactions involving tens of millions of dollars. 

UBSFS, a broker-dealer and futures commission merchant that is an indirect subsidiary of UBS Group AG, admitted to the statement of facts and to acting willfully as that term is used in civil BSA enforcement, the order said. 

The penalty follows a December 2018 consent order in which UBSFS paid $14.5 million and was cited for the same monitoring gaps, according to the order. FinCEN said the firm told the agency it expected new automated monitoring for foreign currency wires by mid-2019 but did not deploy the system until March 2021, and did not notify FinCEN of the delays. The order describes the conduct as that of a recidivist.

In the interim, the firm relied on a manual quarterly report generated by copying data from four systems into a spreadsheet, a process FinCEN said was unreliable, poorly documented and too infrequent to catch suspicious patterns. An internal January 2019 slide deck acknowledged that the report was “still not effective,” according to the order. A coding error in the report systematically undercounted wire values for roughly two years, suppressing alerts on hundreds of transactions, FinCEN said.

The replacement system also proved to be flawed, according to the order. UBSFS selected a partial data feed that excluded more than five percent of foreign currency wires from monitoring, while about 12 percent were missing counterparty information, and the firm built no exception queue to catch transactions that failed to process, according to FinCEN. The agency said the gaps were identified only after its investigation began and the firm hired an outside consultant in August 2022.

FinCEN also cited customer due diligence failures tied to clients with ties to Russia and Latin America. The order describes accounts opened for entities beneficially owned by a Russian oligarch with reported close ties to President Vladimir Putin, which held more than $175 million as of February 2022, and says negative news screening generated thousands of hits that UBSFS dismissed without adequate justification. In another instance, a customer’s consulting income tied to a sanctioned oligarch went unidentified until shortly before the customer was indicted on U.S. sanctions charges in March 2022, according to the order.

The order also describes a scheme in which a small group of actors, including a former UBSFS financial adviser, opened more than 40 accounts for dozens of shell companies to conceal third-party financing in securities offerings. FinCEN said the arrangement went undetected for more than a decade and surfaced only after a regulatory inquiry.

FinCEN agreed to credit $48 million against the penalty for parallel settlements of $20 million each with FINRA and the SEC and $8 million with the CFTC, the order says. The order also requires a SAR lookback by an independent consultant and directs the program review to prioritize customers and transactions linked to the U.S. Southwest border and cartels, Iran, Venezuela and Russia.