US banks updates
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Wells Fargo has agreed to pay $37m to settle federal claims that the US bank fraudulently overcharged clients for foreign exchange services, the latest of a string of penalties since a fake accounts scandal erupted five years ago.
US government attorneys alleged in a civil complaint filed on Monday that Wells Fargo from 2010 to 2017 overcharged almost 800 commercial clients for currency trades and intentionally misrepresented the prices they were charged.
“Through this brazen and wide-ranging fraud, Wells Fargo was able to secretly obtain tens of millions of dollars from the customers to which the bank was not entitled,” the government attorneys in New York’s southern district said in the complaint.
Wells Fargo declined to comment.
America’s third-largest bank by assets has been enmeshed in scandals that have cost it billions of dollars in fines and penalties, toppled two chief executives and prompted the Federal Reserve to place punitive growth limits on its balance sheet.
Charlie Scharf was brought in as chief executive in 2019 to help repair the bank, but regulatory penalties have continued.
Earlier this month the Office of the Comptroller of the Currency assessed a $250m penalty against the bank for taking too long to fix issues the banking regulator laid out in a 2018 consent order.
In Monday’s complaint on foreign exchange services, government attorneys alleged that Wells Fargo staff defrauded clients through a strategy called “big figure trick”, which involved switching digits in a transaction price to inflate it. According to court documents, one Wells Fargo sales specialist told a colleague a client “didn’t flinch at the big fig the other day. Want to take a bit more?”
A separate scheme known as the “BSWIFT pinata” allegedly involved staff who boosted higher sales margins by picking the best rate for Wells Fargo and the worst rate for customers on wire transactions. One bank employee compared this to getting candy from a piñata, according to the complaint.
Government lawyers said that through “improper financial incentives . . . Wells Fargo created a work environment in which defrauding or otherwise taking advantage of customers became normal business practice”.
Similar compensation incentives have been blamed for pressuring staff to commit fraud in other parts of the bank including the retail division where employees created millions of fake checking and credit accounts without authorisation.
“It’s still a multiyear journey from here to get it all completed,” Wells Fargo chief financial officer Mike Santomassimo told investors at a conference shortly after the OCC penalty was announced. “It won’t always be in a straight line, we’ll have setbacks along the way. Hopefully less and less as we go.”