Morgan Stanley, a big financial company, is being looked at closely by government agencies. They’re checking how well the company makes sure that the money its clients use is not from illegal activities like money laundering.
The Securities and Exchange Commission (SEC), the Office of the Comptroller of the Currency, and some parts of the Treasury Department are among the agencies checking Morgan Stanley’s practices. This news comes after a previous check by the Federal Reserve.
The investigation focuses on how Morgan Stanley checks the identities of potential clients and where their money comes from. They’re also looking at how closely the company watches its clients’ money movements, especially those from other countries.
James Gorman, the company’s boss, has said they are already working on improving their methods to follow money within their business.
The SEC has asked Morgan Stanley about how they check specific clients, including some that were flagged by E*Trade, a company Morgan Stanley bought in 2020. One of these clients is a rich person with links to Russia which the UK sanctioned, and another person whose money movements didn’t match their US residency and job.
Other agencies like the Financial Crimes Enforcement Network and the Office of Foreign Assets Control have also asked Morgan Stanley for information about their policies.
The OCC also got in touch with Morgan Stanley about some issues with how they check their customers, after looking into their anti-money laundering measures.
These investigations also involve E*Trade, which is a big part of Morgan Stanley’s business. The SEC and another agency are questioning Morgan Stanley about why they changed E*Trade’s customer-on boarding processes.
News of these investigations caused Morgan Stanley’s stock (NYSE: MS) to drop by over 5%.
Morgan Stanley, a major financial firm, is facing intense scrutiny from government agencies over how it handles potential money laundering risks among its wealth management clients.
Regulators such as the SEC, OCC, FinCEN, OFAC, and the Federal Reserve are investigating Morgan Stanley’s client vetting and monitoring practices. These investigations focus on how well Morgan Stanley verifies the identities of potential clients, determines the sources of their wealth, and monitors their financial activities.
The probes also involve specific inquiries into certain clients, including a billionaire with ties to Russia who faced UK sanctions, an individual with unusually high account balances given their stated occupation, and clients flagged by E*Trade, a business acquired by Morgan Stanley.
In response, Morgan Stanley’s Executive Chairman, James Gorman, has highlighted the company’s investments in compliance, technology, and AI to address regulatory concerns.
The investigations underscore the importance of financial institutions maintaining robust anti-money laundering practices to prevent illicit financial activities.
