The Bank Secrecy Act (BSA) and regulations issued by the Treasury Department’s Financial Crimes Enforcement Network require broker-dealers to file SARs for transactions suspected to involve fraud or a lack of an apparent lawful business purpose.
The SEC’s enforcement action marks the second BSA action against Wells Fargo Advisors in the last five years. In November 2017, the SEC ordered Wells Fargo Advisors to pay a $3.5 million penalty for failing to file at least 50 SARs on time.
According to the latest SEC order, between April 2017 and October 2021, Wells Fargo Advisors “did not timely file at least 25 SARs related to suspicious transactions in its customers’ brokerage accounts involving wire transfers to or from foreign countries that it determined to be at a high or moderate risk for money laundering, terrorist financing, or other illegal money movements,” the SEC stated.
System Failure
Failure to file the suspicious activity reports was “due to Wells Fargo Advisors’ deficient implementation and failure to test a new version of its internal anti-money laundering (AML) transaction monitoring and alert system adopted in January 2019,” the SEC stated. Thus, “the system failed to reconcile the different country codes used to monitor foreign wire transfers.”
The SEC further found, beginning in April 2017, Wells Fargo Advisors “failed to timely file at least nine additional SARs, due to a failure to appropriately process wire transfer data into its AML transaction monitoring system in certain other situations.”
For those reasons, the SEC’s order found Wells Fargo Advisors violated Section 17(a) of the Securities Exchange Act and Rule 17a-8. Wells Fargo Advisors did not admit or deny the SEC’s findings. 
Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.