(Bloomberg) -- The Federal Reserve is scrutinizing whether Morgan Stanley's wealth management business is taking adequate measures to prevent potential money laundering by wealthy clients from outside the US.
The New York-based bank's top regulator is pressing the firm to improve controls and processes, according to a person with knowledge of the matter. Fed officials privately reprimanded the firm earlier for not making all of the changes it sought, the person said, asking not to be identified discussing the confidential talks.
Andy Saperstein, who has oversight over the division, has met with Fed officials and promised to rectify any shortcomings, according to an earlier report from the Wall Street Journal on the regulator's interest.
Representatives for the Fed and bank declined to comment.
Senior executives across Wall Street have described an era of heightened scrutiny from authorities in Washington, including mounting pressure to bolster internal controls. That can elevate costs and, if not adequately addressed, eventually lead to sanctions.
Rival Goldman Sachs Group Inc., responding separately to its own challenges from the Fed, is seeking to hire hundreds of new compliance staff to help address the deficiencies identified by the central bank, Bloomberg has reported.
At Morgan Stanley, the wealth business has grown into the firm's biggest engine, responsible for almost half of the company's revenue over the last year. Ted Pick is set to become the next chief executive officer starting in January, replacing longtime chief James Gorman, spearheaded the bank's wealth management expansion and reshaped its identity into a global powerhouse in tending to the fortunes of the wealthy.
Saperstein, who also was a contender for the top post, was granted oversight of the firm's asset-management business in addition to his role leading wealth management.
(Updates attribution throughout.)
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