Morgan Stanley Faces Financial Regulatory Controversy as Several Institutions Investigate Its Anti-Money Laundering Activities

Cailian Press, July 23rd (Editor Zhou Ziyi)
According to insiders, the Financial Industry Regulatory Authority (FINRA) is investigating Morgan Stanley, primarily focusing on whether the company has conducted adequate reviews of its clients’ money laundering risks.
It is reported that FINRA has reviewed the wealth management and trading business of this Wall Street bank from October 2021 to September 2024, examining customer reviews, risk rankings, and related practices. Additionally, FINRA has requested Morgan Stanley to provide information on its vast wealth management business and its trading department’s U.S. and international clients, as well as detailed information on organizational charts, reporting paths, and customer risk scoring tools.
It should be noted that FINRA is not an official government agency but is responsible for overseeing broker-dealers under federal law and has the authority to impose fines on members who violate its regulations.
In December 2018, FINRA imposed a $10 million fine on Morgan Stanley for failing to comply with anti-money laundering regulations within five years.
The Federal Reserve has also expressed concerns over Morgan Stanley’s risk management controls in recent years. Subsequently, Morgan Stanley has been working to improve its client screening practices, such as closing thousands of accounts, withdrawing from certain countries, and expanding restrictions on types of clients.
The Financial Crimes Enforcement Network, a joint effort between the U.S. Department of Justice and the Treasury Department, is also investigating Morgan Stanley’s anti-money laundering activities, with these investigations primarily focusing on its wealth management division.
Moreover, the Office of The Comptroller of The Currency found that thousands of financial account management accounts at the bank did not undergo regular enhanced due diligence, while accounts subject to enhanced due diligence are typically considered high-risk.
In response to the overwhelming regulatory pressure, a spokesperson for Morgan Stanley stated that the bank has made significant investments in anti-money laundering and client review programs. They added that, like all large banks, Morgan Stanley undergoes routine and repeated inspections by multiple regulatory authorities. “Such regulation is not unique to Morgan Stanley nor does it indicate any issues with our operations or controls,” they said.