Wells Fargo Advisors Settles Over AML Breach Allegations

Josh O'Neill

14 November 2017

The main US financial regulator has slapped a $3.5 million penalty against ’s allegations that new managers starting in March 2012 pressured compliance officials to stop filing suspicious activity reports (SARs), the bank agreed to the settlement.

The SEC charged the San Francisco-headquartered firm with failing to, or delaying to, file the reports at least 50 times over a 15-month period. The majority of the violations were tied to accounts at branches catering for international clients, and the failures related to clients who had previously been the subject of SARs.

“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 SEC’s cease-and-desist order. 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 flagged for suspect activity, it said.

At the time, Wells Fargo Advisors’ new compliance management also told 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 alleged.

Provided under the Bank Secrecy Act, SARs are a tool used to monitor suspicious activities that would not ordinarily be flagged under other types of report. They can cover almost any activity considered out of the ordinary, if there is suspicion that the account holder is trying to conceal something or avoid reporting under the Act.

Wells Fargo has been hit by a number of regulatory issues in recent years. News broke last year that Wells Fargo was pressuring and incentivizing its staff to open checking accounts and credit cards for customers without their knowledge. Since then, numerous employees have filed whistleblowing suits accusing the bank of firing them for shining a light on the issue.

Under US federal law, broker-dealers must file reports to the US Treasury Department’s Financial Crimes Enforcement Network flagging any transactions involving at least $5,000 that they suspect could be tied to illicit activity, were made to circumvent the law, or used the broker-dealer to facilitate criminal activity.