Morgan Stanley stock tumbled Thursday after the Wall Street Journal reported that the bank's wealth arm faces multiple federal probes over its client-vetting practices and potential money laundering risks.
The Securities and Exchange Commission, the Office of the Comptroller of the Currency, and Treasury Department officials are involved in the investigation, the WSJ reported, citing unnamed sources. The latest round of scrutiny comes after the Federal Reserve in November launched a similar probe.
The regulators are investigating whether Morgan Stanley has properly investigated potential clients and their sources of wealth, as well as how it monitors their financial activity.
Some of the probes regard Morgan Stanley's international clients. The SEC last year sent Morgan Stanley a list of current and former clients questioning the bank's vetting process. One listed client is a billionaire with ties to Russia that has been sanctioned by the U.K. Other clients were cut off from E-Trade, Morgan Stanley's trading platform, due to red flags, but still managed to land business with the financial-advisor unit, according to the WSJ.
The Treasury's Financial Crimes Enforcement Network (FinCEN), also provided a list of client names to Morgan Stanley. The bank also received an administrative subpoena from the Treasury's Office of Foreign Assets Control for information on its sanctions policies and procedures.
Morgan Stanley has worked to address the issues by investing in compliance, technology and artificial intelligence to better analyze the cash flows tied to its wealth business, the WSJ reported.
Still, the Fed told Morgan Stanley that it is considering supervisory action.
Morgan Stanley Stock Performance
MS stock unraveled 5.3% Thursday. The shares have looped through multiple consolidations, unable to make new highs since February 2022. Morgan Stanley retreated 6.9% year-to-date.
The bank reports Q1 earnings early April 16. JPMorgan, Wells Fargo and BlackRock kick off results early Friday.
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