U.S. Bancorp has agreed to pay $613 million in penalties to state and federal authorities for violations of the Bank Secrecy Act and a faulty anti-money-laundering program.
Three federal regulators and the U.S. Attorney's Office of the Southern District of New York announced the coordinated actions Thursday. The bank's AML program had been the subject of a 2015 consent order by the Office of the Comptroller of the Currency.
News of the fine wasn't a surprise. U.S. Bank had disclosed last month that it was setting aside $600 million related to an expected enforcement action by regulators.
The OCC said the bank had systemic deficiencies in its anti-laundering monitoring systems, which resulted in gaps and "a significant amount of unreported suspicious activity."
The bank failed to adopt and implement a compliance program because of an inadequate system of internal controls, ineffective independent testing, and inadequate training, the agency said. The Federal Reserve Board, Financial Crimes Enforcement Network and the U.S. Attorney's Office of the Southern District of New York also announced penalties against the bank.
"Today's resolution finalizes legacy matters involving our AML compliance program," said Andy Cecere, president and CEO of U.S. Bank. "We regret and have accepted responsibility for the past deficiencies in our AML program. Our culture of ethics and integrity demands that we do better. One of U.S. Bank's key priorities is to maintain an exceptional AML program and we are confident in the strength of the program we have in place today."
Last month, U.S. Bank disclosed that it had a banking relationship with Scott Tucker, a payday lender who was sentenced in January to more than 16 years in prison related to a $2 billion payday lending enterprise.
The investigation into Tucker "covered issues related to the adequacy and effectiveness of U.S. Bank's legacy Bank Secrecy Act/anti-money laundering compliance program," U.S. Bank said in a securities filing in January.
Geoffrey S. Berman, the U.S. attorney for the Southern District of New York, said U.S. Bancorp will face two felony violations for willfully failing to have an adequate anti-money-laundering program and willfully failing to file a suspicious activity report.
The Justice Department has agreed to defer prosecution for two years, after which time it will seek to dismiss the charges assuming U.S. Bancorp continues to comply with the settlement agreement.
Berman said U.S. Bancorp operated its AML program "on the cheap," by restricting headcount and other compliance resources and imposing hard caps on the number of transactions subject to AML review "in order to create the appearance that the program was operating properly."
U.S. Bancorp also "concealed its wrongful approach from the OCC," and failed to detect and investigate large numbers of suspicious transactions, Berman said. The bank filed more than 5,000 currency transaction reports with incomplete and inaccurate information, which impeded law enforcement’s ability to identify and track potentially unlawful behavior.
Berman's office estimated that if U.S. Bancorp had had proper monitoring in place for just six months, it would have filed an additional 2,121 suspicious activity reports, known as SARs.
The bank also failed to monitor Western Union transactions involving noncustomers of the bank that took place at bank branches.
The bank will pay $453 million to the Justice Department, $75 million to the OCC, $70 million to Fincen and $15 million to the Fed.