Treasury Penalizes Anti-Money Laundering Failure After Weak Enforcement

The U.S. Treasury Department is raising the cost of turning a blind eye to suspicious financial activity. On August 3, Treasury’s Financial Crimes Enforcement Network (FinCEN) imposed a $125 million penalty on investment bank UBS Financial Services (UBSFS) for failing to improve its monitoring and reporting system for suspicious banking activity indicative of money laundering, sanctions evasion, and terror financing. UBSFS admitted that it willfully violated the Bank Secrecy Act, the main anti-money laundering legislation in the United States, by not properly implementing its requirements. FinCEN’s penalty — the largest ever imposed on a broker-dealer — reflects the scale and repeated nature of UBSFS’s violations. The company failed to adequately monitor more than 60,000 foreign currency wires totaling over $10 billion. FinCEN entered into a consent order with the bank in 2018 for similar negligence and directed UBSFS to fix identified flaws in its monitoring system. Such lax anti-money laundering surveillance is a systemic issue extending far beyond UBSFS, incentivized by weak penalties that often equal a fraction of an institution’s profits and less than a tenth of a percent of the volume of unmonitored transactions. Bank Cooperation With Regulators Is Key to Defending National Security The U.S. government relies on reporting mandated by the Bank Secrecy Act to scrutinize millions of transactions and flag signs of illicit finance. Various state and federal law enforcement agencies rely on Suspicious Activity Reports (SARs) to investigate crimes such as fraud, drug trafficking, and terrorism. SARs were used in 90 percent of Internal Revenue Service criminal investigations and 40 percent of FBI Organized Crime Drug Enforcement Program investigations in 2024. Banks’ failures to report suspicious activity enable America’s adversaries to anonymously store, access, and move money that might otherwise be investigated or blocked by sanctions. Russian and Iranian elites leverage shell companies to stash their money in bank accounts and luxury properties. For example, UBSFS did not file timely reports on suspicious transactions by high-risk customers connected to Russia and Latin America, including an oligarch closely tied to Russian President Vladimir Putin. Penalties Have Failed To Deter Bank Noncompliance FinCEN has often failed to impose penalties sufficient to deter noncompliance among major financial institutions, as demonstrated by UBSFS’s recidivism. In 2022, investigators revealed that multiple banks previously under federal scrutiny for financial misconduct had failed to block numerous suspicious transactions connected to sanctioned Russian oligarchs, despite flagging the activity. In 2024, a $3 billion penalty imposed on TD Bank for trillions of dollars in monitoring failures — including transactions tied to drug trafficking and to the accounts of an institution linked to a World Trade Center bombing conspirator — removed a significant portion of the bank’s $14 billion in adjusted net income that fiscal year. Criminal liability is also uncommon: while lower-level employees at TD Bank were indicted, the executives responsible for lax anti-money laundering policy rarely face similar consequences. FinCEN Should Strengthen Penalties, Reporting Requirements When major failures to comply with federal anti-money laundering regulations receive only a slap on the wrist, recidivism is likely to occur. FinCEN ought to impose more severe penalties from the outset, rather than only after repeated violations. UBSFS’s heightened penalty is a good first step, but a pattern of strong enforcement is needed to establish a norm. Furthermore, company executives who willfully violate anti-money laundering obligations should face criminal liability, such as the fines and imprisonment already provided for under the Bank Secrecy Act at 31 U.S.C. § 5322. Without the threat of personal consequences, executives have less of a stake in programs to stop oligarchs and cartels from laundering money through their corporations. FinCEN should also expand reporting requirements to catch the shell companies taking advantage of bank negligence. The Corporate Transparency Act required U.S. businesses to disclose information on their ownership, which was stored in a registry accessible to law enforcement. However, in 2025, FinCEN exempted domestic companies — the vast majority of businesses previously covered, many of which are foreign-controlled. Regaining access to this information is key to unmasking foreign adversaries hiding within the U.S. financial system. Angela Howard is a research analyst at the Center on Economic and Financial Power (CEFP) at the Foundation for Defense of Democracies (FDD), where Emilia Marshall is an intern. For more analysis from the authors and FDD, please subscribe HERE. Follow FDD on X @FDD and @FDD_CEFP. Follow Angela on X @angela__howard. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.