Multiple U.S. regulators have joined the probe into Morgan Stanley’s efforts to prevent potential money laundering by its wealth clients, according to a report from The Wall Street Journal.
The Securities and Exchange Commission, the Office of the Comptroller of the Currency and other offices within the Treasury Department are examining whether the bank has adequately investigated the identities of high net-worth clients and the sources of their wealth and implemented robust controls to mitigate money laundering risks, people familiar with the matter told the publication. The regulators are examining Morgan Stanley’s international clients as well.
That’s in addition to the Federal Reserve, which initiated a similar investigation on the lender last year.
The SEC has reportedly provided Morgan Stanley with a list of current and former clients, seeking information on how the bank conducts due diligence and verification procedures for these individuals. The agency also quizzed the lender on why it continued to do business with some clients who were barred by E*Trade, the digital trading platform it acquired, despite the red flags.
The Financial Crimes Enforcement Network also sent a list of names, some of which match the SEC list. The Office of Foreign Assets Control sent an administrative subpoena to Morgan Stanley inquiring about the bank’s policies and procedures, according to a bank document seen by the Journal.
The OCC also issued Morgan Stanley a matter requiring attention notice last year over customer due diligence. Morgan Stanley followed up with a detailed action plan to the regulator and conducted an annual review of its anti-money laundering programs, according to some sources, the Journal reported.
Morgan Stanley has been working to address regulators’ concerns, though the bank has not disclosed the inquiries to the public. In response to some of the regulatory scrutiny, James Gorman, the bank’s executive chair and former CEO told the Journal in January that the firm is investing in compliance, technology and artificial intelligence to enhance its understanding of the flow of funds associated with its wealth management business.
The latest investigations into its wealth management arm follow a $249 million settlement by Morgan Stanley over its block-trading practices in January. In a probe conducted by the Justice Department and the SEC, the lender admitted to making false statements about its block trades from at least June 2018 through August 2021.
