Wells Fargo Clearing Services (Wells Fargo Advisors) · Institution's own AI · severity 3 of 5
On 20 May 2022 Wells Fargo Advisors agreed to pay a $7 million SEC penalty after failures in its automated anti-money-laundering transaction monitoring system delayed suspicious-activity reports. Per the SEC order, a new version of the system adopted in January 2019 was not adequately tested and failed to cross-reference two sets of country codes, so it generated no alerts for about 1,708 wire transfers to or from high- and moderate-risk countries between January and August 2019; FINRA spotted the gap. A separate data-processing failure suppressed about 658 alerts on 11 days in 2017 to 2019. The firm filed at least 34 suspicious activity reports late. It neither admitted nor denied the findings and said the legacy issues were resolved promptly. The SEC described an automated monitoring system, not AI.
Record last reviewed Oct 22, 2026 · Markdown
Date
Country
United States
AI system
Automated AML transaction monitoring and alert system (new version deployed January 2019); not described as AI
AI?
Automated system not described as AI
The system was automated, but neither the institution nor a regulator described it as AI; it is listed because it is routinely discussed as an AI failure.
Category
Status
Settled
Severity
3 of 5
Impact
$7 million civil penalty · ≈ $7 million · At least 34 suspicious activity reports filed late (25 linked to the 1,708 un-alerted wires, on average 157 days late; nine linked to about 658 suppressed alerts, 536 to 1,209 days late). The underlying suspicious activity in individual late SARs ranged from $10,480 to $6.2 million. No customer loss is quantified in the order.
What happened?
Wells Fargo Advisors, the trade name of broker-dealer Wells Fargo Clearing Services, surveilled customers' brokerage transactions "using automated transaction monitoring systems in order to timely alert the firm to potentially suspicious transactions", including wires involving countries it rated high or moderate risk, according to the SEC order. The system, maintained by parent Wells Fargo's Financial Crimes Surveillance group, used Geospatial country codes for wire data, while the bank's list of high- and moderate-risk countries used ISO codes; before January 2019 the system cross-referenced the two.[2]
In January 2019 the firm switched to a new version of the system that failed to cross-reference the codes. The SEC found the system could not produce alerts for wires involving 58 of the 160 high- or moderate-risk countries where the codes differed, and that the firm "failed to perform sufficient testing" on deployment and did not monitor whether the system worked as intended. For transactions between January and August 2019 it generated no alerts for approximately 1,708 wire transfers to or from at least 20 high-risk and 18 moderate-risk countries.[1][2]
FINRA raised the issue in September 2019 during a routine examination, after finding wires over $5,000 that appeared to meet the system's thresholds but had not triggered alerts. The firm fixed the system in October 2019, reviewed the 1,708 wires and filed at least 25 late SARs between October 2019 and February 2020, on average 157 days late, the order says.[2]
Separately, from about April 2017 through May 2019, wire data was not properly processed into the monitoring system in certain situations, such as bank holidays without a matching brokerage holiday, so the system failed to generate about 658 alerts on 11 days. The firm found this itself and reported it to SEC staff in December 2020; nine more late SARs followed, filed between 536 and 1,209 days late. Reuters reported the settlement the same day.[2][3]
When did it happen?
- Jan 2019
Wells Fargo Advisors deploys a new version of its AML transaction monitoring system that fails to reconcile ISO and Geospatial country codes.[2]
- Sep 2019
FINRA asks about wires to high- and moderate-risk countries that failed to trigger expected alerts.[2]
- Oct 2019
The firm fixes the system and begins reviewing the 1,708 wires that generated no alerts; at least 25 late SARs follow by February 2020.[2]
- Dec 2020
The firm notifies SEC staff of a separate wire-processing failure that suppressed about 658 alerts between 2017 and 2019.[2]
- May 20, 2022
The SEC issues a settled order: censure, cease-and-desist and a $7 million civil penalty.[1][2]
What was the impact?
- Financial: $7 million civil penalty · ≈ $7 million[1][2]
- Other: At least 34 suspicious activity reports filed late (25 linked to the 1,708 un-alerted wires, on average 157 days late; nine linked to about 658 suppressed alerts, 536 to 1,209 days late). The underlying suspicious activity in individual late SARs ranged from $10,480 to $6.2 million. No customer loss is quantified in the order.[1][2]
Severity 3 of 5: Rubric 3 (regulatory finding): an SEC cease-and-desist order with a censure and a $7m penalty for at least 34 late suspicious-activity reports; no quantified customer loss.
How did Wells Fargo Clearing Services (Wells Fargo Advisors) respond?
Wells Fargo Advisors neither admitted nor denied the SEC's findings. A spokeswoman said in an emailed statement: "At Wells Fargo Advisors, we take regulatory responsibilities seriously. This matter refers to legacy issues that impacted a transaction monitoring system and the issues were resolved promptly upon discovery." The SEC order credits the firm with remediation, including retaining an outside consulting firm to review its AML transaction monitoring architecture, testing and governance.[2][3]
What was the outcome, and did regulators act?
The SEC censured Wells Fargo Advisors, ordered it to cease and desist from violating Section 17(a) of the Exchange Act and Rule 17a-8, and imposed a $7 million penalty. The SEC noted it was the second Bank Secrecy Act action against the firm in five years, after a November 2017 order over at least 50 late SARs. The firm fixed both monitoring failures and added processes to identify missing wire data, per the order.[1][2]
Was Wells Fargo Advisors' AML monitoring system AI?
No. The SEC describes an automated transaction monitoring and alert system that applied country-code and monetary-threshold rules to wire transfers. It failed because an untested upgrade stopped reconciling two country-code standards, not because of a learned model. The SEC did not call it AI.
What did the monitoring failure miss?
Between January and August 2019 the system raised no alerts for about 1,708 wires to or from high- and moderate-risk countries, and a separate data-processing problem suppressed about 658 alerts between 2017 and 2019. After review, the firm filed at least 34 suspicious activity reports late, some by more than three years.
Did the SEC act, and what did it cost?
Yes. On 20 May 2022 the SEC censured Wells Fargo Advisors, issued a cease-and-desist order and imposed a $7 million civil penalty. It was the firm's second Bank Secrecy Act action in five years; the firm settled without admitting or denying the findings.
Who found the problem?
FINRA, during a routine examination in September 2019, asked why certain wires to high- and moderate-risk countries had not triggered alerts. The firm then found the code-reconciliation fault. It discovered the second, wire-processing failure itself and reported it to SEC staff in December 2020.
- SEC Charges Wells Fargo Advisors With Anti-Money Laundering Related Violations (2022-85) official
- Order Instituting Administrative and Cease-and-Desist Proceedings, In the Matter of Wells Fargo Clearing Services, LLC (Release No. 34-94955) official
- Wells Fargo advisors fined $7 million by U.S. SEC for anti-money laundering lapses (Reuters) news
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