Morgan Stanley MS is reportedly under investigation by the Financial Industry Regulatory Authority (FINRA) for potential money laundering risks associated with its clients.
What Happened: Finra is scrutinizing whether the financial institution adequately assessed its clients for money laundering risks. The investigation is centered around Morgan Stanley’s clients, risk ranking, and other practices from October 2021 to September 2024, reported The Wall Street Journal.
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FINRA has specifically requested information on U.S. and international clients in Morgan Stanley’s wealth-management business and trading desks. This includes politically exposed clients, such as senior foreign political figures and their close associates.
The investigation is part of a broader examination by FINRA, which is responsible for supervising broker-dealers under federal law. This investigation adds to the potential fines Morgan Stanley might face from ongoing federal inquiries into its anti-money-laundering practices.
Morgan Stanley told the publication that it has been overhauling its client-screening procedures after the Federal Reserve raised concerns about risk management in its wealth-management division. They said the firm has made substantial investments in strengthening its anti-money-laundering and client-vetting systems.
Why It Matters: FINRA has also requested details about Morgan Stanley's risk-scoring tool, which identifies clients needing closer review. The tool was only activated for E*Trade clients in early 2024, following a pause that began shortly after Morgan Stanley acquired the platform.
The probe comes at a time when Morgan Stanley has been performing well financially. The bank recently reported a second-quarter 2025 earnings of $2.13, up from $1.82 a year ago, and beating the consensus of $2.02. Its net earnings also increased to $3.54 billion from $3.08 billion, with a revenue of $16.79 billion, up 12% year over year.
Despite these strong financial results, the ongoing investigations into its anti-money-laundering practices could pose a significant challenge for Morgan Stanley.
Benzinga's Edge Rankings place Morgan Stanley in the 79th percentile for momentum and the 64th percentile for growth, reflecting its strong performance in both areas. Check the detailed report here.
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