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Bloomberg
US Bancorp agreed to pay about $600 million to settle US allegations that it failed to guard against money laundering, under a deal announced in New York.
Prosecutors said the Minneapolis-based bank failed to report suspicious activities of a longtime customer, Scott Tucker, who was using the bank to launder proceeds of a fraudulent payday lending scam. Tucker was convicted of fraud and sentenced in January to almost 17 years in prison.
Authorities also said US Bancorp ignored repeated warnings from internal managers and external regulators about the inadequacy of its anti-money laundering program, and that it excluded critical information on thousands of reports about currency transfers it handled.
The banking industry has been lobbying the Trump administration to reduce compliance requirements under the Bank Secrecy Act, which governs anti-money-laundering protections. Last year, the American Bankers Association called parts of the regulations “outdated and ill-suited for identifying and preventing 21st century criminal activity and terrorist financing†and called for their streamlining or elimination.
Under the terms of the deal with US Bancorp, the government agreed to defer prosecution for two years. The bank agreed to pay a $528 million penalty, including $75 million it paid the Office of the Comptroller of the Currency.
It also agreed to pay an additional $70 million to the US Treasury, and $15 million to the Federal Reserve Board, according to the government. As part of its deal, the bank will acknowledge its wrongdoing. The government will dismiss the charges if the bank abides by its promises, including reforming its anti-money-laundering program.
In a prepared statement, the bank’s chief executive, Andy Cecere, said: “We regret and have accepted responsibility for the past deficiencies†in the anti-money-laundering program. The bank reserved $608 million from fourth-quarter results to cover the cost of the fine, which represents about a third of its fourth-quarter earnings.
Tucker was accused of using Indian tribes to act as sham owners of his payday lending businesses to circumvent usury laws through their legal sovereignty. His company charged interest rates of as much as 700 percent, and Tucker hauled in more than $2 billion in revenue, several hundred million of it in profit.
Tucker was one of US Bancorp’s most profitable customers in the Kansas-area market where his companies were based, generating millions in fees for the bank, according to the government. His transactions began to generate suspicion internally, but executives hesitated to act.