Industry regulators are investigating Bank of America Merrill Lynch over its purported failure to prevent one of its financial advisers covering up the money laundering activities of a Qualcomm executive in 2012.
Last year president of global business operations at chipmaker Qualcomm, Jing Wang, pleaded guilty to charges of insider trading, money laundering and obstruction of justice.
Wang made hundreds of thousands of dollars in illicit profits by purchasing shares of Qualcomm and another company based on knowledge gained through his job, according to US prosecutors.
Now wealth management giant Merill Lynch is being drawn into the fallout, according to sources.
According to the US Department of Justice, former Merrill financial adviser Gary Yin helped Wang to launder money earned through insider trading.
Yin, who managed over US$200 million in assets at a Merrill office in San Diego, also pleaded guilty to conspiring to obstruct justice and launder money. He is scheduled to be sentenced on Friday in US District Court in San Diego.
Among other things, Yin is accused of altering records in Merrill's computer system to distance Wang from the illicit trades, lying to Merrill compliance employees, and creating British Virgin Islands shell companies "to conceal stock transactions from Merrill Lynch and others," his plea agreement stated.
As a result of the admissions, Wall Street's Financial Industry Regulatory Authority (FINRA) has been probing Merrill Lynch over its failure to detect Yin's activities.
FINRA, which has been in discussions with Merrill, may take enforcement action against the bank, most likely citing its alleged shortcomings in complying with anti-money laundering regulations, the source said.
The source asked not to be identified because the matter is not public. A spokeswoman for FINRA and a spokesman for Bank of America Merrill Lynch both declined comment.
Like other banking regulators and law enforcement agencies, FINRA has stepped up scrutiny of the securities industry over anti-money laundering compliance.
In February of last year, FINRA fined Brown Brothers Harriman US$8 million for failures in detecting suspicious penny stock transactions. The regulator also suspended Brown Brothers' global anti-money laundering compliance officer for one month.
In December 2014, FINRA ordered two brokerage units of Wells Fargo to pay a joint US$1.5 million fine for failing to verify 220,000 new accounts during a nine-year period.