FINRA Fines Two Subsidiaries of Wells Fargo for AML Failures
FINRA ordered Wells Fargo Advisors and Wells Fargo Advisors Financial Network, two broker-dealers under common control, to pay a fine for anti-money laundering ("AML") failures.
According to FINRA, the firms' Customer Identification Program ("CIP") contained a design flaw that, over the course of nine years, created a deficiency in the way in which the transaction-processing system assigned customer identifiers to new accounts. The glitch resulted in the firms' failure to conduct customer identity verification for nearly 220,000 of such accounts.
FINRA imposed a joint fine of $1.5 million on the two entities, neither of which was required to admit liability. In its complaint, FINRA noted that the determination of the amount of the fine was based on the fact that the entities self-identified and reported the design flaw and ran thorough CIP processes on the remainder of the 220,000 accounts, which remained open at the time the flaw was discovered. Ultimately, the broker-dealers closed over 300 of those accounts because they could not confirm customers' identities to a sufficient extent.
See: Press Release. See also: Cabinet AML Specialty Page (available to Cabinet subscribers only).
Commentary
This action by FINRA indicates that the regulator intends to brook no diversion from the strictures of its AML regulations. There is no indication in the complaint that the broker-dealers were responsible for the design flaw or negligent in failing to discover it in a timelier manner. Rather, the action serves as a reminder to all FINRA-regulated entities that strict compliance with AML laws and regulations is expected. If an entity falls short, then it can expect to be penalized.