Many of Morgan Stanley’s client assets have been identified as being at high risk of money laundering.
A recent study by Wall Street Journal has exposed the wealth management department of investment bank Morgan Stanley allegedly failing to properly audit the assets of its wealthy clients. Interviews with employees and internal messages paint a picture of questionable business practices under the bank’s management.
24% of Morgan Stanley’s global wealth-holding accounts have been identified by the firm as having a high risk of money laundering, according to a 2023 report summarizing more than 45,500 clients. Journal. The bank apparently added to the report that its anti-money laundering controls were “weak” due to “pre-existing global issues” and increased risk appetite.
While this may be a case of an investment bank that is thought to be lax in targeting the wealthy, the large number of accounts raises the question of whether there is a serious problem with ultrarich recruitment. Morgan Stanley did not immediately respond Fortune’s request for comment.
Money laundering, which is a report of secretly profiting from illegal activities, is a widespread problem in the world economy. The United Nations estimates that around $2 trillion in money is released annually, representing 2% to 5% of global GDP.
Knowing the true depth of money laundering proves tricky, but recently there has been a slight lifting of the veil. For example, a bipartisan report from the Senate in 2020 revealed that Russian Origarchs evaded sanctions in the country by investing $18 million in high-tech. Crypto is shaping up to be another step for the rich to take the numbers, as a report from Chainalysis notes.
Such skepticism seems to have started, especially in Europe. The incidence of money laundering has increased by 25% between 2018 and 2023, according to data from the financial company Moody’s. That exceeds the global increase by 8%. Money laundering appears to be highest in the UK, followed by Italy, then Russia.
“There is a link between human trafficking and money laundering,” said Keith Berry, managing director of Moody’s Analytics, referring to the rise of modern-day slavery as well. “This is an ever-increasing area that is constantly looking for disruptions in the financial system, weekends, holidays, and every day when legal personnel are not online to protect their organization,” he added.