Cultivating A BSA/AML Compliance Culture Starts At The Top: The Case Of Wells Fargo Advisors

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As the banking attorney’s here at Duane Morris have consistently advised, any compliance program will succeed only if it is successful in cultivating a culture of compliance. Nowhere is that mantra more evidenced as in the recent case of Wells Fargo Advisors.

On November 13, 2017, the Securities and Exchange Commission (SEC) imposed a $3.5 million penalty on Wells Fargo Advisors for anti-money-laundering reporting violations. These violations were the direct result of a shift in the firm’s compliance culture beginning in July 2012. That same month, the firm had hired a “new senior manager” who was responsible for the firm’s anti-money laundering program.

According to the SEC’s cease and desist order, prior to this management change, the firm’s surveillance and investigations group were “recognized…for the quality and increased number” of follow-up reports filed on suspicious activities of previously reported account holders. However, the SEC’s order alleged that “[s]hortly 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 order, employees in the firm’s surveillance and investigations group 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 tagged for suspect activity.”

This shift in the compliance culture at Wells Fargo Advisors resulted in a 60% decline in the monthly SAR filings between July 2012 and June 2013 which coincided with the firm’s appointment of this “new senior manager” in July 2012.

As noted in previous blogs, compliance with the Bank Secrecy Act and Anti-Money Laundering requirements will remain a hot button issue for regulatory agencies into 2018 and, therefore, it will be imperative for financial institution management to continue their focus on cultivating a culture of compliance throughout the institution. As the case of Wells Fargo Advisors illustrates, cultivating a compliance culture always starts at the top.

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