DOJ, Treasury Join Probe of Capital One's Anti-Laundering Program

Capital One has received requests for information from federal regulators about its anti-money-laundering program and check casher clients, as authorities lean on banks to do a more thorough job policing their customers — and their customers' customers.

The $309 billion-asset bank received the inquiries early this year from the Justice and Treasury departments, including the latter's Financial Crimes Enforcement Network, Capital One said Tuesday in its annual securities filing.

They are similar to previously disclosed subpoenas and requests for testimony received from the New York District Attorney's Office, Capital One said.

Capital One said it is cooperating with all the agencies in the investigation. A call and an email placed late Tuesday with a company spokeswoman were not immediately returned.

The disclosures come at a time when banks worldwide have been "derisking," or severing relationships with whole categories of clients in certain industries or regions, in reaction to large fines levied against some institutions for laundering-related lapses. Money services businesses such as check cashers and money transmitters, long treated as a high-risk category, have had a particularly hard time obtaining or keeping bank accounts.

The situation seems unlikely to change. Regulators have insisted that banks have been overreacting by cutting off vast swathes of businesses, and recent reports that HSBC's Swiss unit aided criminals and tax dodgers have armed transparency advocates to press for tighter requirements.

Capital One said nearly a year ago that it would stop doing business with check cashers and payday lenders. It said at the time that such businesses no longer fit with its strategic priorities, though it would not say whether changes in the regulatory environment like the Justice Department's Operation Choke Point influenced the decision.

Before Capital One decided to stop doing business with check cashers, the McLean, Va., firm was serving about half of the 150 licensed check cashing companies in New York state, the Financial Service Centers of America said at the time of the announcement.

Another big player in credit cards has tangled with regulators over anti-laundering issues recently. The banking unit of Discover Financial Services, based in Greenwood, Del., agreed to strengthen its systems for monitoring compliance with anti-laundering regulations. There was no financial penalty, but regulatory costs have added to its recent financial challenges.

Discover said last month that its regulatory and compliance costs will rise in 2015.

"Across the industry, there are much more significant compliance expenses, driven by all the regulators," Discover CEO David Nelms said in an interview with American Banker.