Wells Fargo faces $100 million fine but will continue in business as usual

On Thursday, the Federal Reserve Board announced that it has imposed a hefty fine of $67.8 million on Wells Fargo & Co. and the Treasury Department’s Office of Foreign Assets Control imposed an additional $30 million fine.

The bank, headquartered in San Francisco, California, was charged with unsafe or unsound practices relating to historical inadequate oversight of sanctions compliance risks at its subsidiary bank, Wells Fargo Bank, N.A.

The Federal Reserve Board’s investigation revealed that Wells Fargo & Co. had failed to provide adequate oversight, which enabled its subsidiary bank to violate U.S. sanctions regulations. The subsidiary bank had provided a trade finance platform to a foreign bank, which used it to process around $532 million in prohibited transactions between 2010 and 2015.

The Federal Reserve Board’s action is being taken in conjunction with an action by the U.S. Department of the Treasury’s Office of Foreign Assets Control, which is imposing a separate penalty on Wells Fargo Bank for these violations. The total penalty announced by both agencies is approximately $97.8 million.

The Board’s penalty reflects the severity of the bank’s deficient oversight, which allowed its subsidiary bank to repeatedly violate U.S. sanctions regulations. The Board is committed to holding financial institutions accountable for their actions and ensuring that they have adequate controls in place to comply with all applicable laws and regulations.

For about seven years beginning in 2008 and ending in 2015, Wells Fargo and its predecessor, Wachovia Bank, provided a foreign bank located in Europe with software that the foreign bank then used to process trade finance transactions with U.S.-sanctioned jurisdictions and persons.

Wachovia, at the direction of a mid-level manager, customized a trade insourcing software platform for general use by the European bank that Wachovia knew or should have known would involve engaging in trade-finance transactions with sanctioned jurisdictions and persons.

Wells Fargo & Co. has since taken steps to improve its sanctions compliance program and has cooperated with the Federal Reserve Board’s investigation. The bank has stated that it is committed to complying with all applicable laws and regulations and will continue to work with regulators to address any deficiencies.

The Federal Reserve Board’s penalty against Wells Fargo & Co. serves as a reminder to financial institutions that they must have adequate oversight and controls in place to ensure compliance with all applicable laws and regulations. Failure to do so can result in significant penalties and damage to their reputation.

Wells Fargo is accused of allowing an unnamed foreign bank to process $532 million worth of prohibited transactions on its Eximbills financial platform from 2010 to 2015, the Federal Reserve Board said in an announcement.

The bank kicked the foreign client off its platform in 2015 and reported the issue to the Fed and the Treasury, according to a filing from U.S. regulators.

Reuters reported Iran, Syria and Sudan are the foreign countries where the banks are located.

latest penalty for its sanctions compliance violations is not the first time the bank has been in hot water with regulators. Over the past few years, Wells Fargo has faced scrutiny and made headlines for a series of scandals.

One of the most notorious scandals involved Wells Fargo employees opening up millions of fake bank accounts without customers’ permission to meet sales goals. This scandal resulted in a $3 billion civil settlement with the Securities and Exchange Commission and the Justice Department in 2020. The former head of Wells Fargo also pleaded guilty in ongoing litigation related to the fake account scandal last week.

In addition to the fake account scandal, Wells Fargo has also been ordered to pay $2 billion in refunds and $1.7 billion in penalties by the Consumer Financial Protection Bureau for several consumer financial law violations, including charging customers “illegally assessed fees and interest charges” on auto and mortgage loans.

Last year, the New York Times reported that some Wells Fargo managers conducted sham job interviews to meet the company’s diverse hiring goals, which reportedly drew a federal investigation.

“This is the latest in a series of scandals that has tarnished Wells Fargo’s reputation and led to penalties but these legal actions including this fine for the bank’s sanctions compliance violations serves as another reminder that financial institutions remain in business even when they fail to comply with laws and regulations,” said consumer advocate Lisa McCormick. “I have called for a corporate death penalty that would allow prosecutors to liquidate companies that flagrantly and habitually break the law, and Wells Fargo is one of those ‘too big to fail’ banks that should be a prime candidate for judicial dissolution.”

%d bloggers like this: