Wells Fargo Agrees to Pay $375 Million for “Systemic Compliance Failures”
Federal Regulators Find the Bank Failed to Properly Monitor Suspicious Transactions
The Comptroller of the Currency and the Justice Department Reach a Settlement
Wells Fargo & Co. (NYSE: WFC) agreed to pay $375 million in financial penalties to settle charges that it failed to properly monitor and report suspicious transactions, resulting in the bank violating anti-money laundering laws. The settlement resolves twin enforcement actions brought by the Office of the Comptroller of the Currency (OCC) and the Justice Department, underscoring the continued focus of federal regulators on financial crime compliance and the importance of robust anti-money laundering programs.
Findings of “Systemic Compliance Failures”
The OCC found "systemic compliance failures" in Wells Fargo's anti-money laundering program, stemming from "significant and longstanding" issues with its transaction monitoring systems. Specifically, the OCC said the bank's systems failed to adequately monitor transactions for suspicious activity that could indicate money laundering or other financial crimes, allowing suspicious transactions to go undetected.
Investigators found that Wells Fargo's transaction monitoring systems were not designed to take into account many factors that could be indicative of money laundering, and that the bank was slow to react to red flags and other indicators of suspicious activity. This led to "significant deficiencies" in Wells Fargo's ability to detect and report suspicious transactions in a timely manner, the OCC found.
Consequences of the Settlement
OCC’s decision and consent order against Wells Fargo include the following actions:
- Wells Fargo will pay a civil penalty of $250 million.
- Wells Fargo will invest $125 million in its anti-money laundering compliance program.
- Wells Fargo will retain an independent consultant to review its anti-money laundering compliance program.
The Justice Department’s deferred prosecution agreement includes the following actions:
- Wells Fargo will pay a criminal penalty of $50 million.
- Wells Fargo will implement a comprehensive compliance program designed to prevent and detect money laundering.
- Wells Fargo will submit to three years of independent monitoring.
Impact on Wells Fargo and the Banking Industry
The settlement is a significant blow to Wells Fargo's reputation and could potentially have a negative impact on the bank's financial performance. The bank has already been fined billions of dollars for various compliance failures in recent years, including a $3 billion fine in 2016 for its fake accounts scandal.
The settlement underscores the continued focus of federal regulators on financial crime compliance and the importance of robust anti-money laundering programs. Banks are expected to have robust systems in place to detect and report suspicious transactions, and those that fail to do so face significant financial and reputational risks.
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