Morgan Stanley Fined By FINRA For Compliance Lapses

Morgan Stanley, the U.S. Wall Street firm, was fined $10 million by the Financial Industry Regulatory Authority (FINRA)  for compliance failures.

According to a report in Reuters, citing FINRA and Morgan Stanley, the firm agreed to pay $10 million after FINRA contended it had lapses in compliance for more than five years from January of 2001 until April of 2016. Morgan Stanley did not admit or deny guilt in the settlement but signed off on the entry of the findings of FINRA, the industry watchdog agency. In a statement to Reuters, Morgan Stanley said it was pleased to resolve the matter from several years ago. Reuters reported that brokerages have to have policies and procedures on the books that comply with detecting and stopping money laundering but that Morgan Stanley’s compliance fell short. According to the report, FINRA charged that Morgan Stanley automated the surveillance systems and didn’t get information from other internal systems. Those lapses hurt Morgan Stanley’s ability to track tends of billions of dollars of wire and foreign currency transfers. FINRA said some of those transactions were to and from countries that are known to have money laundering issues, FINRA noted, according to Reuters.

Other violations covered in the settlement include failing to reasonable monitor deposits of 2.7 billion shares of penny stock between 2011 and 2013, noted the report. Reuters cited FINRA as saying since 2013 Morgan Stanley has engaged in “extraordinary steps” to improve its anti-money laundering (AML) programs, such as a new system to monitor penny stock transactions and insider trading.

Morgan Stanley wasn’t the only Wall Street bank to run afoul of FINRA in recent weeks. Earlier in December the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, fined UBS  $14.5 million for what it said was a willful violation of the Bank Secrecy Act. The FinCEN said UBS failed to create and use an appropriate AML system to address the risks in accounts from both traditional brokerage and banking services.

Bank of America’s Take on Latin America’s Digital Payments Advantage

Digital payments are growing in Latin America as companies like Mercado Libre and TerraPay rapidly advance digital banking and digital wallets in the region.

Central bank instant payments mandates and modernized infrastructure in Brazil have also moved the needle to the point where the region is arguably moving faster toward digital transformation than anywhere else in the world.

PYMNTS Intelligence’s “How the World Does Digital” report surveyed 67,000 consumers across 11 different countries. It found that Brazil was far ahead of all of them — including the United States — in digital engagement. Drilling down into the results, in 2023, 66.8% of Brazilians used mobile banking apps on their phones at least once a month, and 46.8% used these apps at least weekly.

Consumers in Brazil are embracing digital payments as well. The report found that by 2023, two-thirds of consumers in Brazil had smartphones and 75% had debit cards. In the same year, 77% of consumers in Brazil were using Pix, the instant payments app for mobile phones launched by the country’s central bank.

“After many decades of the status quo in payments, Latin America is going through a major transformation,” Marcelo Moussalli, managing director and Latin America product head executive at Bank of America, told PYMNTS.

That transformation is being driven by the two largest economies in the region — Brazil and Mexico — representing roughly two-thirds of the total GDP of Latin America, he said. Regulators in those countries launched new payments initiatives aimed at modernizing their respective banking systems.

The top-down, mandate-driven approach has been focused on boosting competition while lowering transaction costs, increasing transaction security and fostering wider financial inclusion. Beyond the commonality of the goals, the governments in Brazil and Mexico took different approaches to get there.

Similar Goals, Differing Approaches

Brazil, for its part, introduced the Pix real-time payments network. Mexico’s innovations have included a peer-to-peer (P2P) network and a digital collection capability underpinned by QR code technology.

“In both countries, these innovations are improving [payments] speed, visibility and the overall user experience,” Moussalli said.

Against that backdrop, the adoption of real-time rails and new payment modalities has, in some cases, exceeded expectations, but there is still a robust greenfield opportunity, he said.

By way of example, in 2020, Pix’s first year, the network captured 16% of Brazil’s electronic payments volumes; that tally has grown to 40% as recently as this year. Mexico’s real-time payments network has grown 6% year on year as measured in 2024, with 60 million individuals using the network, although the QR codes and P2P networks have notched less adoption than originally anticipated.

The trend is inexorable, however. Although some businesses have been hesitant to pivot more fully to these new payment modalities and may cling to traditional methods such as cash, as time goes on, “it’s going to be hard to do business in Mexico or Brazil” without connecting to these rails, Moussalli said.

“They’re going to miss out on opportunities if they don’t adopt new digital payment options,” he said.

That’s especially true in commercial payments, where suppliers will increasingly demand to be paid in real time.

Asked by PYMNTS about how traditional financial institutions can help enterprise clients embrace change, Moussalli said Bank of America launched support for QR codes, which clients can access through the CashPro banking platform. Clients scan codes from paper or electronic invoices, and within seconds the platform retrieves the invoice details from the beneficiary bank and displays those details for review and confirmation of payment.

“This dramatically speeds up the payments process” beyond the confines of paying suppliers and into the realm, for example, of mandatory transactions that companies make for employees’ retirement benefits, Moussalli said. That “helps eliminate bureaucracy in processing payments.”

The feature has been so well-received in Brazil that it is being explored for use in Europe, he said.

Although regulators initially drove innovation in financial services in Brazil and Mexico, the central banks are well connected to their respective markets and are working with banks and merchants to foster the shift to digital transactions, Moussalli said. Cash withdrawals from banks have plummeted in the double digits. There’s particular promise in pivoting to digital payments in Mexico where cash is still tied to 85% of all retail transactions, especially for transactions below the U.S. dollar equivalent of $50.

“The impact of these changes is ongoing,” said Moussalli, adding, “there’s no going back.”