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Wells Fargo (WFC) Announces End of 2015 AML Consent Order

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Zacks Equity Research
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After facing a horde of legal investigations since 2016, Wells Fargo & Company WFC announced that a consent order, placed in 2015, related to its anti-money laundering (AML) compliance program was terminated by the Office of the Comptroller of the Currency.

The regulators are satisfied with the remedial measures taken by Wells Fargo regarding the consent order. Notably, the bank implemented customer due diligence standards that includes collection of current beneficial ownership information for certain business customers.

"Building the right risk and control infrastructure and remediating our legacy issues remain our top priority, and the termination of this consent order is evidence of our progress," said Wells Fargo’s CEO Charlie Scharf. He added, "While we are pleased with this action, we have a significant amount of work ahead of us and are continuing to commit the necessary resources to this effort.",.

In a quick recap, the 2015 consent order was issued when the regulators realized that the key problem was related to how the bank approves proper identification documents of new and existing customers. Wells Fargo was given a deadline of June 2018 to enforce all remedial actions, which it got extended.

Among the several other limitations and probes that Wells Fargo is currently facing, the one that remains its priority is the asset growth restrictions placed by the Federal Reserve in early 2018.

Last month, the company said that it still has to work on improving its control systems in order to have the cap lifted. Wells Fargo submitted a proposal, including the compliance and operational risk management program of improvement in September 2020. If the Fed approves it, Wells Fargo will be required to appoint independent third parties to conduct the review of its processes.

Further, on satisfaction of both the above points, full Fed board will be required to agree to revoke the sanction.

The company has come a long way in its remedial journey by investing in the businesses to enhance compliance and risk management capability. Also, it undertook divestiture of non-core operations so as to free capital. Nevertheless, Wells Fargo's revenues remain under pressure due to low interest rates and a volatile fee income trend.

Shares of Wells Fargo have gained 24.8% in the past six months compared with 31.4% growth registered by the industry.

Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Apart from Wells Fargo, many other Wall Street banks remain under the scrutiny of regulators. In October, Citigroup C was slapped with a $400 million penalty by The Office of the Comptroller of the Currency and the Federal Reserve for long-standing deficiencies in its risk management and internal controls processes. Also, Goldman Sachs GS admitted to conspiring to violate the Foreign Corrupt Practices Act in connection with a scheme to pay more than $1 billion in bribes to Malaysian and Abu Dhabi officials.

Further, in November JPMorgan JPM agreed to pay a fine of $250 million for poor risk management and internal controls over the fiduciary business.

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