OperationalRiskSecurity,riskregulation,Risk and Regulation,Risk Management and Compliance,

OperationalRiskSecurity,riskregulation,Risk and Regulation,Risk Management and Compliance,

U.S. Bancorp, based in Minneapolis, has long had a reputation for being one of the best-run large regional banks in the country. But because the bank’s anti-money laundering controls were inadequate, it failed to spot and investigate a large number of suspicious transactions, federal prosecutors for the Southern District of New York said.

U.S. Bancorp said it would pay $613 million in penalties to settle the missteps with the Department of Justice and other agencies. The prosecutors highlighted the bank’s handling of a high-profile customer who, they asserted, should have set off alarm bells:

From October 2011 through November 2013, the Bank willfully failed to timely report suspicious banking activities of Scott Tucker, its longtime customer, despite being on notice that Tucker had been using the Bank to launder proceeds from an illegal and fraudulent payday lending scheme using a series of sham bank accounts opened under the name of companies nominally owned by various Native American tribes (the “Tribal Companies”). From 2008 through 2012, Tucker’s companies extended approximately five million loans to customers across the country, while generating more than $2 billion in revenues and hundreds of millions of dollars in profits. Most of this money flowed through accounts that Tucker maintained at the Bank.

USB employees responsible for servicing Tucker’s ongoing account activity disregarded numerous red flags that Tucker was using the tribes to conceal his ownership of the accounts. For example, Tucker spent large sums of monies from accounts in the names of Tribal Companies on personal items, including tens of millions of dollars on a vacation home in Aspen and on Tucker’s professional Ferrari racing team.

U.S. Bancorp said that it had put in place measure to improve its anti-money laundering controls. The missteps under scrutiny took place between 2009 and 2014.

Re-disseminated by The Asian Banker from The New York Times