Regulators Target Top International Firms with Latest Penalties

As greater onus is placed on anti-money laundering responsibilities for financial institutions across the globe during this modern age of banking, the fines for violations of international AML/CFT standards continue to roll in. In September alone, two large multinational banks – each of which are no strangers to regulatory transgressions in the past – felt additional heat from regulators for non-compliance, and now face crippling financial penalties for their shortcomings.

OCC Penalizes Wells Fargo

Wells Fargo has been exposed of late for repeated failures in their ability to maintain the appropriate protocols for effective mitigation of financial crime. These include limitations in suspicious activity/transaction reporting, customer identification, and most notably identification of beneficial ownership – an area that has developed into a top priority for American firms since FinCEN’s final beneficial ownership rule came into play on January 1st, 2024. While the bank claims that they are working on these issues (company representatives released a statement saying the firm is “committed to completing the work with the same sense of urgency as our other regulatory commitments”), their limited actions taken over recent years to address these deficiencies remains telling. The bank was highlighted by multiple financial regulators over its struggles to maintain its regulatory obligations with respect to monitoring white-collar crime back in November of 2023, with the bank being issued formal orders to improve its consumer-oversight and risk management systems to deter financial crime. These orders came at the same time the bank was facing a lawsuit which alleged that it allowed a nearly-$500 million Ponzi scheme to operate unimpeded. Earlier that year, Wells agreed to pay $1 billion to settle claims of widespread misconduct that originated in 2018. The allegations facing the banking giant included that it defrauded its shareholders, and had repeated failures in both identifying and preventing problems within their internal infrastructure that ultimately led to improper charges being levied against consumers in its respective auto and mortgage-lending businesses.

The Office of the Comptroller of the Currency (OCC) has now joined the party, coming down on Wells Fargo last week and forcing them into an agreement to enhance their anti-money laundering, sanctions screening, and overall risk management practices. Under this agreement, Wells Fargo must obtain the regulator’s approval of its revamped compliance department as well as provide the OCC notice before expanding its offerings.

In a press release, the OCC gave the following statement on the matter:

“The Formal Agreement identifies deficiencies relating to the bank’s financial crimes risk management practices and anti-money laundering internal controls in several areas including suspicious activity and currency transaction reporting, customer due diligence, and the bank’s customer identification and beneficial ownership programs. The agreement requires the bank to take comprehensive corrective actions to enhance its Bank Secrecy Act/anti-money laundering and U.S. sanctions compliance programs.”3

In order to ensure legitimacy and impartiality in assessing its own compliance protocols, Wells Fargo is also required to maintain a three-person compliance committee – the majority being neither Wells Fargo officers nor employees.2 For the OCC in particular, this is just their latest attempt to keep the banking conglomerate in check. In 2016, the firm paid $35 million to the regulator, along with an additional $100 million to the Consumer Financial Protection Bureau, for engaging in the illegal practice of secretly opening unauthorized deposit and credit card accounts. Unfortunately, Wells Fargo – America’s fourth largest bank by total assets – is one of the lucky few “big banks” that has been able to weather major fines of this variety without batting an eyelash. Time will tell if the gross downpour of penalties facing the firm will ultimately lead to it changing its ways.

Attack on Danske Bank’s Estonian Business Practices Continue

Danske Bank – Denmark’s largest lender in terms of total assets –  is perhaps the world’s most infamous financial institution when it comes to AML-related failures. The embattled bank has been an example of exactly what not to do when it comes to compliance with anti-money laundering safeguards, as in the not-so-distant past they have been found not only negligent, but actually complicit in criminal activity themselves. In 2017, the firm was involved in the largest money laundering scandal ever in Europe (and arguably the largest cross-border financial scandal in world history) after it was discovered that nearly €800 billion of suspicious transactions of Estonian, Russian, Latvian and other origins flowed through their Estonia-based bank branch 2007 to 2015. It was later confirmed that tens of billions of dollars-worth of these suspicious funds ultimately flowed through the U.S., creating irreparable damage to the integrity of the American financial system in the process. The fallout from the case had been widespread, with the firm ultimately pleading guilty to U.S. charges of conspiracy to commit bank fraud, with their plea deal costing them a whopping $2.06 billion paid to the U.S. Department of Justice (DOJ), the Securities Exchange Commission (SEC) and the Danish Special Crime Unit (SCU) $2.06 billion.

Over this period however, additional investigation into the bank’s affairs and their insufficient internal controls have continued, with more transgressions coming to light. Now, once again, the activities of Danske’s Estonian branch have come back to haunt them, with the French government recently orchestrating a new legislative offensive against the firm. French authorities have been hot on the heels of the distressed bank since February of 2019, when it was discovered a French-Russian businesswoman capitalized off of the lender’s weak anti-money laundering controls to duck millions of euros worth of taxes and customs duties through the improper use of offshore shell companies.1

“The Estonian branch of Danske Bank had practices and procedures that allowed the NRP [non-resident portfolio] customers to open accounts and record transactions without reasonable controls or due diligence,”1 French prosecutors concluded. The firm will reportedly pay the French government €6.3 million in penalties to settle these latest money laundering charges – a bill that the bank hopes will be the last in the lengthy and costly series of enforcement actions taken against them since 2017. Unfortunately for Danske, it appears that their already sullied reputation will not be improving anytime soon.

Citations

1.       “Danske Bank Pays €6.3 Million to Settle Money Laundering Charges in France.” ACAMS Money Laundering, 18 Sept. 2024. 

2.       Hart, Connor. “Wells Fargo Commits to Regulator Agreement to Fix Financial-Crime Controls.” The Wall Street Journal, 12 Sept. 2024. 

3.       “OCC Issues Enforcement Action against Wells Fargo Bank.” OCC.Gov, Office of the Comptroller of the Currency, 12 Sept. 2024.