SEC Orders Wells Fargo Advisors to Pay $3.5M Penalty

The US Securities and Exchange Commission is ordering Wells Fargo & Co.’s (WFC) wealth management unit to pay $3.5M for alleged anti-money laundering reporting violations. Wells Fargo Advisors agreed to pay the penalty. It is settling the charges but without denying or admitting to the regulator’s findings.

According to the SEC, starting in early 2012, new bank managers started pressing compliance officials to cease in their submission of suspicious activity reports. The failure to file these SARs reports, or delay them, reportedly occurred 50 times in a little over a year and involved accounts for international customers who were previously named in such reports.

Federal law mandates that broker-dealers notify the U.S. Treasury Department’s Financial Crimes Enforcement Network about any transactions of at least $5K that they believe may involve illegal activity. The regulator blames a “new senior manager” that was hired in the brokerage firm’s compliance group and placed in charge of the anti-money laundering program.

The cease-and desist order said that soon after this individual began working at Wells Fargo Advisors, the broker-dealer’s surveillance and investigation’s group began getting “conflicting” instructions about filing SARs and they were directed to look for “proof” of illegal activity and not just suspected illegal conduct. Investigators were also purportedly told to not document disputes with management over whether to submit SARs.

The Commission said that from 7/12 to 6/13, Wells Fargo Advisors, which had previously been known for its follow-up reports regarding suspect activities, had reduced such filings by approximately 60%. A Wells Fargo Advisors spokesperson said that the firm took it upon itself to review the confusions and it has since made improvements. In 2014, the brokerage firm retained an outside compliance firm to examine its SAR protocols.

Wells Fargo Under Fire Over Various Misconducts
For over a year, Wells Fargo has been in the headlines over numerous alleged misconduct, including the setting up over at least two million unauthorized bank and credit card accounts. The bank consented to pay $185M to regulators to resolve the related charges.

Just last month, the Financial Industry Regulatory Authority announced that Wells Fargo Clearing Services LLC and Wells Fargo Advisors Financial Network must pay more than $3.4M in customer restitution over unsuitable recommendations made involving exchange-traded products and related supervisory failures. That announcement came just months after the self-regulatory organization fined the bank $3.25M for errors and inaccuracies in the way it reported over-the-counter trades. In March, a FINRA arbitration panel ruled that Wells Fargo Advisors would have to pay one investor $35K for unsuitable recommendations that compelled him to invest in housing and energy investments even though they were not appropriate for him.

In a recent filing, Wells Fargo reported that more ex-employees have stepped forward claiming that they were let go from their jobs after attempting to report wrongful activities at the bank, such as making thousands of customers buy unnecessary auto insurance and charging other customers improper mortgage fees. Other ex-Wells Fargo employees had previously come forward claiming that they were retaliated against after reporting to the unauthorized account set up to bank’s own ethics hotline. In April, the US Labor Department ordered Wells Fargo to rehire one whistleblower and pay that person $5.4M.

The SSEK Partners Group is a securities fraud law firm.

Read the SEC’s Administrative Proceeding in the Wells Fargo Case (PDF)

More Wells Fargo workers allege retaliation for whistleblowing, CNN, November 7, 2017


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