U.S. Bank, one of the country’s biggest lenders, has agreed to pay $613 million to settle claims that it scrimped on anti-money laundering safeguards to cut costs.
In addition to complaints by the Office of the Comptroller of the Currency, the Federal Reserve, and the Treasury Department’s Financial Crimes Enforcement Network, the payments would resolve two felony charges of violating the Bank Secrecy Act filed by the U.S. Attorney’s Office in Manhattan.
The 1970 law requires lenders to help the government spot crimes from money laundering to terrorist financing, but U.S. Bank, which has 3,100 branches nationwide and more than 70,000 employees, ran its anti-money laundering program “’on the cheap’” U.S. Attorney Geoffrey Berman said. The company limited staff and other resources provided to the unit and then imposed hard caps on the number of transactions subject to anti-money laundering review, Berman said.
“We regret and have accepted responsibility for the past deficiencies in our anti-money laundering program,” CEO Andy Cecere said in a statement. “Our culture of ethics and integrity demands that we do better.”
The Minneapolis-based company said it has addressed its shortcomings in the past four years by appointing new managers for the program, developing a more transparent – and frequent – reporting process and expanding its monitoring of transactions. Under the terms of the settlement, the criminal charges will be dropped if the bank maintains a clean record for two years.
“We are unaware of a commercial bank that has survived being convicted of a felony,” Jaret Seiberg of the Cowen Washington Research Group, said in a report. That could give the Currency Comptroller grounds to revoke the company’s charter, and it’s “why the structuring of the criminal action is critical,” he said.
The lender had been well aware that its practices flouted regulatory standards, prosecutors said Thursday, and documents as old as 13 years acknowledged that alert limits were based on staffing levels rather than risk.
A 2009 memo from the lender’s anti-money laundering director to the chief compliance officer warned that the unit’s workers were “stretched dangerously thin” even as the suspicious-activity reports they were required to submit to regulators were increasing, prosecutors said.
The bank, which at one point had investigated some transactions that fell outside its alert limits to determine whether those boundaries should be adjusted, stopped the practice after it showed that suspicious-activity reports should have been filed on 25 percent to 80 percent of them, prosecutors said.
When an examiner from the comptroller’s office warned that managing the money-laundering detection program based on available staffing was improper, the bank took steps to conceal the practice, prosecutors added.
The lender also failed to monitor Western Union transactions by non-customers at its branches and to report suspicious activities by payday-lender Scott Tucker from 2011 to 2013, prosecutors said, despite being warned that Tucker was using the bank to launder proceeds from an illegal business that charged interest rates as high as 700 percent.
Tucker, 55, was convicted of offenses including wire fraud, money laundering and participation in a racketeering enterprise in a federal jury trial in New York in October. He claimed in court that his $3.5 billion business, based in Overland Park, Kan., was actually owned by Native American tribes, an argument that the jury determined to be unfounded.
U.S Bank’s shares fell 0.3 percent to $55.15 in New York trading on Thursday.
