Morgan Stanley's Screening of Wealth-Management Clients Draws More Scrutiny

Morgan Stanley is being probed by the Financial Industry Regulatory Authority over whether the Wall Street giant properly vetted its clients for money-laundering risks.

- Annamaria Andriotis

The probe by Wall Street's self-regulator focuses on the firm's clients, risk ranking, and other practices from October 2021 through September 2024, according to people familiar with the matter. It adds to the possible fines Morgan Stanley is already facing from federal investigations into its anti-money-laundering practices.

Finra has been asking for information on U.S. and international clients in Morgan Stanley's sprawling wealth-management business and the division that houses its trading desks, the people said.

One of Finra's requests has been for information on politically exposed clients, including senior foreign political figures, their relatives or close associates, and the Morgan Stanley representatives who were assigned to those accounts. The probe is part of a deep dive by Finra, which isn't a government agency but is responsible under federal law for supervising broker-dealers and has the power to fine members that are in violation of its rules.

Morgan Stanley has been working to fix its client-screening practices after the Federal Reserve for years flagged concerns about risk-management controls in the firm's wealth-management unit.

The cleanup efforts have included shutting down thousands of accounts, pulling back from Venezuela and other Latin American countries, and expanding its restrictions on the types of clients it is willing to onboard, The Wall Street Journal previously reported.