Account review backup exposes compliance control failures (Financial Advisor IQ)

Trying to determine what went wrong is central to unraveling a huge logjam of customer accounts awaiting required reviews at a large broker-dealer. The due diligence nightmare occurred at Morgan Stanley, where the accounts were closed or restricted pending further review. In exclusive comments, FrontLine’s Founder and President Amy Lynch points to a likely breakdown somewhere in the compliance chain, including a system wide automated process that did not have the necessary human intervention to prevent the backlog from occurring. Ms. Lynch further states that the size of Morgan Stanley’s platform has increased substantially through acquisitions, including E*Trade, and this could have led to an increase in the number of accounts slated for enhanced reviews. She adds that additional international accounts would often require stepped up due diligence due to a firm’s anti-money laundering procedures. See Financial Advisor IQ, “Due-Diligence Logjam: Morgan Stanley Closes and Restricts Accounts“