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Wells Fargo (WFC) Unit Settles Anti-Money Laundering Charges

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Wells Fargo & Company’s WFC broker-dealer and investment adviser subsidiary, Wells Fargo Advisors has agreed to pay $7 million as a settlement for the violation of anti-money laundering rules, according to the Securities and Exchange Commission (SEC). This is the second time in the past five years that the company has been penalized by the SEC for anti-money laundering violations.

The bank failed to cautiously implement the new version of its internal anti-money laundering transaction monitoring and alert system, which was incorporated in January 2019. This led to a systemic failure of reconciling different country codes used to monitor foreign wire transfers.

As a result, WFC failed to timely file at least 25 activity reports related to suspicious transactions in its customer’s brokerage accounts. These activities included wire transfers to or from foreign countries that could have led to the potential risk of laundering, terrorist financing, or other illegal money movements.

Beginning April 2017, the company failed to timely file at least nine additional suspicious activity reports. This was due to a failure to appropriately process wire transfer data into its anti-money laundering transaction monitoring system.     

Thus, between April 2017 and October 2021, Wells Fargo failed to file at least 34 suspicious activity reports in a timely manner per the regulators. In addition to the $7 million penalty, Wells Fargo Advisors, without admitting or denying the SEC’s findings, agreed to a censure and a cease and desist order.

Markedly, in November 2017, the SEC settled Wells Fargo’s case for failing to timely file at least 50 suspicious activity reports.

WFC’s spokeswoman said, “At Wells Fargo Advisors, we take regulatory responsibilities seriously. This matter refers to legacy issues that impacted a transaction monitoring system and the issues were resolved promptly upon discovery.”

Wells Fargo has been slapped with numerous penalties and sanctions since September 2016, including a cap on its asset position by the Federal Reserve. In September 2021, the bank was levied with restrictions on acquiring certain residential mortgage servicing and a $250-million penalty due to its inefficient home-lending loss mitigation program.

In April 2022, it paid $32.5 million to resolve allegations made in March 2020 of self-dealing with the company’s 401(k) plan. Hence, Wells Fargo still has a long list of pending legal cases and remains under close supervision of regulatory authorities.

Over the past six months, shares of the company have declined 18.7%, narrower than the 25.2% decline recorded by the industry.

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

Malpractices by Other Firms

Several other banks continue to encounter legal hassles and are charged with huge sums of money for business malpractices.

A unit of The Bank of New York Mellon Corporation BK was charged with a record fine and handed a reprimand by the Central Bank of Ireland. Per an article by Bloomberg, the company broke the rules on outsourcing fund administration services and provided “inaccurate and incomplete information” to the regulators.  

BNY Mellon Fund Services DAC admitted to the breaches, which took place between July 2013 and December 2019. The company was fined €10.78 million ($11.8 million) for 16 regulatory breaches. The penalty was reduced from €15.4 million as the company decided to settle.

The Central Bank of Ireland’s director of enforcement, Seana Cunningham, said that BNY Mellon “failed to act with expediency, transparency and openness even once it was aware that there were further issues with its outsourcing arrangements.”

Earlier in May, Bank of America BAC was asked to pay a penalty of $10 million by The Consumer Financial Protection Bureau for processing illegal, out-of-state garnishment orders against customer bank accounts, thus violating state laws.

The bank allegedly froze customer accounts unlawfully, sent payments to creditors based on out-of-state garnishment court orders and charged garnishment fees on its customers’ accounts. However, the payments made to creditors should have been processed under the laws of the states where the customers lived.


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