Crypto Is Tightening Up Its Anti-Money Laundering Game, While Banks Are Still Being Fined for Non-Compliance
Morgan Stanley isn’t the only bank to have been fined recently for Anti-Money Laundering non-compliance.
In 2018, barely a month passed without an official at a financial institution or government department calling on crypto to clean up its act. In the last quarter of the year alone, the United States Department of the Treasury, the Canadian Parliament and the Russian Federal Financial Monitoring Service all urged or announced the introduction of Anti-Money Laundering (AML) laws for cryptocurrencies, and all of them based their moves on the (noticeably mistaken) presumption that cryptocurrencies are a primary haven for criminals, who use them either as a medium of exchange for illicit goods or as a means of hiding (i.e., laundering) the source of dirty money.
However, when the U.S. Financial Industry Regulatory Authority (FINRA) dished out a $10 million fine on Dec. 26 for failures to comply with AML legislation, this penalty didn't actually go to a crypto exchange or crypto-related business. Instead, it went to Morgan Stanley, the 38th-biggest bank in the world (and the sixth-biggest in the U.S.). For anyone who's ever noticed the sheer abundance of news stories about crypto's apparent problem with money laundering, this may come as a shock, yet a deeper inspection of recent history reveals that the traditional financial world, in fact, has just as serious a problem with laundering as crypto, if not a more serious problem.
And what's particularly interesting about the issue of money laundering is that, while the cryptocurrency industry is rapidly tightening up its own codes and conduct, the established financial industry still seems stuck on a plateau of underlying illegality, despite its vastly superior position and resources. Indeed, crypto exchanges are increasingly observing Know Your Customer (KYC) and AML regulations, while new trade bodies are being established with the aim of erecting self-regulatory guidelines for the crypto industry to follow. And in the industry's zeal to become a fully legitimate and secure feature of the global economic landscape, it might just have a thing or two to teach the pre-existing banking sector.
Morgan Stanley, Deutsche Bank, Société Générale, UBS and so on…
As reported by Reuters, FINRA slapped a $10 million fine on Morgan Stanley's brokerage arm for long-standing failures in its AML reporting system. Between January 2011 and April 2016, Morgan Stanley's automated monitoring system failed (for an undisclosed reason) to receive vital customer information and data from the bank's other systems, thereby preventing it from being able to exhaustively track the movement of "tens of billions of dollars" (according to Reuters) in currency transfers and bank wires.
Making this lapse even worse for Morgan Stanley, FINRA learned that the bank became aware of deficiencies in its monitoring system as early as 2015, but didn't actually begin