Wednesday, September 28, 2022

Wells Fargo to pay $220 million in settlement over currency practices

Wells Fargo has agreed to pay $220 million to settle federal charges that it violated the law by committing “systemic, intentional misconduct” in its Foreign Exchange Trading Department, according to the Federal Reserve.

The investigation, which took place from April 2014 through May 2017, found that Wells Fargo violated various consumer protection and anti-money laundering laws and “agreed to improve its systems and controls.” The bank has already forfeited approximately $188 million of that due to the violations, though the exact amount wasn’t included in the Fed’s announcement.

The bank said it’s “pleased” to have resolved the case with the Federal Reserve.

“We take compliance with the law seriously at Wells Fargo,” the bank said in a statement. “We’re sorry this occurred. We’ve already made significant changes and continue to make additional changes to ensure that these issues do not reoccur.”

The bank was also accused of overcharging customers on their monthly deposits. The Fed’s investigation found that Wells Fargo used its platform for merchant cash or check services — in which banks typically help businesses calculate the costs of handling foreign currency — to charge for services that they were not providing.

Wells Fargo admitted to the Fed that it overcharged on deposits from July 2013 through May 2014. While $270 million of the penalty was levied as a result of the customer overcharges, the bank will pay a penalty of $154 million to the FDIC for overdrafts caused by the illegal activity.

“This settlement will reinforce the seriousness of any such conduct and provide significant financial relief to harmed customers, many of whom may be very low-income individuals, elderly persons, minorities or veterans,” said Betty Yee, acting director of the Fed’s Enforcement Division.

Yee said that Wells Fargo had taken “additional steps to enhance its risk controls and systems” since the initial period of the Fed’s review. In June, the Fed rejected the bank’s plan to raise its minimum cash buffer requirement — a key regulatory requirement — by about $40 billion, saying the company did not have “sufficient” systems and controls in place to monitor its operations.

The latest compliance and forensics issues have occurred just months after the DOJ last year sued Wells Fargo, accusing the bank of unfair and fraudulent lending practices. At the time, Assistant Attorney General Makan Delrahim said there was “concrete evidence” that the bank intentionally misrepresented mortgage underwriting standards to support its mortgage business, misleading investors into believing that the bank had a “fail-safe control” to ensure it wouldn’t default on the loans.

Wells Fargo has also suffered through several other recent scandals, including in 2017 when it revealed that it created as many as 3.5 million phony accounts in its customers’ names without their permission. The bank also faced scrutiny in 2012 over its auto insurance policies.

Last year, the bank paid a penalty to the Consumer Financial Protection Bureau for its relationship with PNC Financial Services Group. PNC Group paid $50 million in civil penalties in exchange for a CFPB order forbidding the company from engaging in unfair lending practices, allowing for 45 additional checking accounts for customers with outstanding and previously sold credit cards or other financial products.

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