Justice Department probes Wells Fargo’s wholesale unit
Investigation focuses on potential employee fraud related to altering client documents
The Justice Department is probing whether employees committed fraud in Wells Fargo & Co.’s wholesale banking unit, following revelations that employees improperly altered customer information, people familiar with the matter said.
The Wall Street Journal previously reported that some employees in the unit added information on customer documents, such as Social Security numbers and dates of birth, without their consent.
The Justice Department in recent weeks has sought more information from the bank to examine if management pressure prompted the employees to improperly alter or add the information, the people said. The employees at the time were working to get customer documents in order prior to a regulatory deadline.
Wells Fargo spokesman Alan Elias said the bank doesn’t comment on regulatory or Justice Department matters. A spokesman for the Justice Department declined to comment.
The Justice Department is
interested to learn if there is a pattern of unethical and potentially fraudulent employee behavior tied to management pressure, the people said. The employees in the wholesale banking unit, the side of the bank that deals with corporate customers, mishandled the documents last year and earlier this year, the Journal has previously reported.
The probe only adds to the problems at Wells Fargo, which has been bruised since a sales
scandal in its consumer bank imploded two years ago. It also underscores how bad behavior has emerged throughout the bank and has continued even after the 2016 blow-up over sales practices. The bank’s problems have cascaded since then, with issues related to lofty sales goals and improper customer charges emerging across all of its major business units, prompting a range of other federal and state investigations.
In wholesale banking, the bank’s own review discovered in recent months that the problems there are more widespread than previously thought, the people said. The problems with altered documents initially centered in the part of the wholesale banking business called the business banking group, which focuses on companies with annual sales of $5 million to $20 million. Wells Fargo has found similar problems in its commercial banking division, which primarily serves middle-market companies, and its corporate trust services group, which helps with the administration of securities issued by companies and governments, one of the people said.
Wells Fargo’s Mr. Elias said in a statement that “this particular situation involved a new process and a new document for our team members to complete.” He said the bank is taking corrective actions and instituting additional training.
“Even though this matter has not negatively impacted our customers, we take all issues relative to documentation seriously and expect appropriate behavior from front line team members through senior leaders,” he added. “If we get something wrong, we fix it.”
The Journal previously reported that employees altered the customer documents as Wells Fargo was rushing to meet a deadline to comply with a 2015 consent order from the Office of the Comptroller of the Currency. The regulator had ordered the bank to beef up its anti-moneylaundering controls, including its processes for ensuring that there are proper identification documents and that the bank has the ability to see client activities across a common database.
When the OCC issued the consent order, Wells Fargo had more than 100,000 customer accounts it needed to verify, the Journal previously reported. Wells Fargo in May formally asked the OCC for an extension beyond the initial June 30, 2018, deadline.
Over the past year or so, the bank has been reaching out to thousands of clients requesting updated documentation on information such as relevant client addresses or dates of birth.
Banks must have certain information, known as “know your customer” regulatory requirements, in order to keep banking their clients.