The Wall Street Journal reported that the Federal Reserve is currently investigating Morgan Stanley’s (NYSE:MS) wealth management business to ensure stringent controls against money laundering by wealthy foreign clients.
The regulator has raised concerns over lapses in Morgan Stanley’s (MS) due diligence processes and anti-money laundering efforts, prompting scrutiny into the bank’s wealth management unit.
Andy Saperstein, the head of Morgan Stanley’s (MS) wealth management unit, has been in discussions with Fed officials to address these identified lapses.
The Fed initially discovered deficiencies in vetting foreign wealth management clients in 2020, and despite directing Morgan Stanley (MS) to rectify the issues, many remained unresolved in 2021 and the subsequent year.
Eventually, Saperstein presented a comprehensive plan to the Fed in 2022 outlining the bank’s roadmap to address these issues. He has approximately 18 months to execute the remediation under the proposed plan.
Wealth management constituted around half of Morgan Stanley’s total revenue in Q3. However, according to WSJ, rich foreign clients only contributed minimally to new inflows.
It’s worth noting that Morgan Stanley (MS) is also under a separate ongoing investigation for its alleged involvement in a Venezuelan money laundering scheme.