Feds hit U.S. Bancorp with $613 million fine
The corporate parent of the nation’s fifth-largest bank was hit with $613 million in penalties Thursday for disregarding suspicious transactions — including millions of dollars linked to race car driver and payday lender Scott Tucker.
U.S. Bancorp, parent of U.S. Bank, agreed to criminal and civil penalties in settlements announced by the Manhattan U.S. Attorneys Office in New York, the Office of the Comptroller of the Currency, the Federal Reserve and the Financial Crimes Enforcement Network.
From 2009 until 2014, U.S.Bank set an artificial cap on the number of alerts generated by its customer transaction monitoring systems, authorities said. The Minneapolis-based bank based the number of alerts on low staffing levels, rather than on the level of risk in the transactions.
In a 2009 memo, the bank’s chief compliance officer complained that the staffers assigned to monitor suspicious transactions were “stretched dangerously thin.” The warning went largely ignored as the bank hid the problem from the Office of the Comptroller of the Currency, authorities said.
The lax oversight aided Tucker, a longtime U.S. Bank customer who was sentenced to more than 16 years in prison last month for running an illegal $3.5 billion Internet-based payday lending scheme that victimized thousands of consumers with loan interest rates as high as 1,000%.
The charges against Tucker included illegal laundering of millions of dollars from his payday loan network through sham bank accounts opened under the name of companies nominally owned by Native American tribes.
Authorities said U.S. Bank staffers responsible for servicing the Tuckerlinked accounts disregarded red flags, including tens of millions of dollars spent on his professional Ferrari racing team and on a vacation home in Aspen, Colo.
Manhattan U.S. Attorney Geoffrey Berman characterized the bank’s antimoney laundering program as “highly inadequate. The bank operated the program ‘on the cheap’ by restricting headcount and other compliance resources, and then imposed hard caps on the number of transactions subject to (anti-money laundering) review in order to create the appearance that the program was operating properly,” Berman said in a statement.
Andy Cecere, president and CEO of U.S. Bank, issued a statement in which the bank expressed regret and accepted responsibility for the deficiencies. “Our culture of ethics and integrity demands that we do better,” he said.
U.S. Bancorp said it has fully reserved for the financial penalties and faces “no further financial impact.”
The settlement with federal prosecutors includes a two-year non-prosecution agreement on two felony violations of the U.S. Bank Secrecy Act. If the bank satisfactorily completes efforts to strengthen its anti-money laundering oversight, the federal government will seek dismissal of the charges. That deal is subject to approval by a federal court judge in New York.