President Trump hasn’t been shy about making good on his campaign promise to loosen burdensome regulations for businesses, especially banks.
But the finance industry isn’t getting a free pass, either: Agencies led by Trump appointees announced $613 million in penalties this week against U.S. Bank, a Minneapolis-based lender that prosecutors say cut corners on anti-money laundering safeguards.
“We have heard often the argument that the Trump administration should be all positives for financials, given the deregulatory bias,” said Jaret Seiberg of Cowen Washington Research Group, but “we have always urged caution in assuming too much.”
While the real-estate mogul’s appointees have dropped planned lawsuits by the Consumer Financial Protection Bureau and slowed a Labor Department rule requiring financial advisers to make investment recommendations that are in a client’s best interest, rather than merely suitable, the U.S. Bank settlement and tougher stress-test scenarios from the Federal Reserve show “that career examiners and prosecutors remain at work,” Seiberg said. “And when it comes to bigger banks violating the law, Team Trump is not going to stop them from bringing enforcement actions.”
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, U.S. Bank’s 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, ran its anti-money laundering program “on the cheap,” U.S. Attorney Geoffrey Berman said. The company limited staff and other resources for the unit and then imposed strict caps on the number of transactions subject to anti-money laundering review, he said.
CEO Andy Cecere apologized for the company’s behavior and said the lender has addressed its past shortcomings 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.
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 settlement “looks to be a step forward toward a more complete resolution of the company’s Bank Secrecy Act/Anti-Money Laundering issues,” said Susan Roth Katzke, a New York-based analyst with Credit Suisse who highlighted the bank’s consent agreement with the Fed.
In that deal, the central bank — one of the company’s primary regulators — included a requirement that U.S. Bank’s board submit a written plan for strengthening its oversight of compliance risk within two months. The lender must also submit quarterly reports to the Fed on its progress complying with the order’s terms.
Earlier this month, the same regulator imposed a time-out on growth at Wells Fargo – an even larger lender than U.S. Bank — after a string of violations including the creation of millions of fake deposit and credit card accounts.
“Imposing the growth restriction on Wells Fargo is a pretty clear signal from the Federal Reserve that it is willing and able to act,” Seiberg said at the time, a sentiment with which Sen. Elizabeth Warren, D-Mass., a frequent critic of the finance industry, concurred.
