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Morgan Stanley’s wealth management division faces regulators’ heat

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Morgan Stanley's wealth management division offers brokerage, custody, investment advising, and financial planning services to high-net-worth individuals and small to medium-sized organisations

As per the Wall Street Journal, several regulators are looking into Morgan Stanley’s wealth management division, with prominent ones being the Office of the Comptroller of the Currency (OCC), the United States Securities and Exchange Commission, and other Treasury Department organisations.

According to the report, regulators are evaluating whether the bank has adequately looked into the names of potential customers, the origins of their income, and how it keeps an eye on their financial activities.

The United States Securities and Exchange Commission and the Treasury’s Financial Crimes Enforcement Network have already sought information on certain clients outside the United States who have raised red flags, the report stated further.

Morgan Stanley has also been asked about why it did business with some who had been cut off by E*Trade which is the digital-trading platform the American financial services giant acquired recently.

“One query reportedly involves a billionaire linked to Russia who had been sanctioned by the United Kingdom, while their activity on E-Trade showed the person was on an island in the Caribbean with more money in their account than their stated income would typically generate,” the report noted.

“The Financial Crimes Enforcement Network (FinCEN) also sent Morgan Stanley a list of names, many of which duplicated the SEC’s list, the report said. The Treasury’s Office of Foreign Assets Control has also asked the bank to share its policies and procedures on sanctions,” it added further.

Morgan Stanley’s wealth management division offers brokerage, custody, investment advising, and financial planning services to high-net-worth individuals and small to medium-sized organisations.

Compared to investment banking, which is highly dependent on economic cycles, the wealth sector produces more consistent income. Morgan Stanley has surpassed competitor Goldman Sachs in market capitalisation thanks to wealth management revenues.

Morgan Stanley has concluded an extensive, multi-year probe of its block trading operations. On its board of directors, it also proposed Megan Butler, a former British financial regulator.

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