U.S. Bank, Citi freed from Obama-era enforcement orders

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A federal regulator has freed the banking units of U.S. Bancorp and Citigroup from enforcement orders that left both companies in the penalty box for more than three years.

The Office of the Comptroller of the Currency announced the actions on Friday. The U.S. Bank order involved problems with the firm’s efforts to prevent money laundering, while Citibank had faced sanctions because of allegedly deceptive tactics in the credit card business.

Both of the orders that were lifted date back to 2015.

The termination of the U.S. Bank order may enable the Minneapolis firm to implement more changes to its branch network than it was able to make previously.

U.S. Bancorp CEO Andy Cecere said recently that when it comes to opening and closing branches, the company has been somewhat handcuffed by the enforcement order.

“When that does get lifted, I think the opportunity for us is in terms of branch optimization,” Cecere said at an industry conference in early December.

U.S. Bank’s order dealt with issues that have continued to bedevil the bank in the years since the OCC’s action. In February 2018, the company entered into a deferred prosecution agreement with the Department of Justice for violations of the Bank Secrecy Act. The bank agreed to forfeit $528 million as part of the deal.

At the same time, the Federal Reserve Board ordered U.S. Bank to improve its compliance with the Bank Secrecy Act and anti-money-laundering rules.

Even after Friday’s announcement by the OCC, the Fed’s consent order with U.S. Bank remains in effect.

“We believe that the termination of the OCC’s consent order is a positive; however, it is hard to put a timeline on the resolution of the Fed’s consent order,” analysts at Keefe, Bruyette & Woods wrote in a research note.

Because the Fed’s order remains in place, U.S. Bank is still restricted from acquiring banks, the KBW analysts stated. But they also noted that the company’s management has expressed more interest in nonbank acquisitions, which are permitted, than bank deals.

Back in October 2015, the OCC found that U.S. Bank had failed to file all necessary reports related to suspicious customer activity. The agency required the bank to implement a plan for remedying its compliance problems.

The $465 billion-asset company said in a press release Friday: “Since 2014, U.S. Bancorp has made significant investments to improve and strengthen its AML and BSA controls, including a new AML and BSA leadership team as well as improved and enhanced processes and systems.”

In Citi’s case, the OCC enforcement order dealt with marketing and billing practices for so-called add-on products, such as identity theft protection, that were sold to credit card holders. Citi was ordered to pay a $35 million penalty.

The OCC’s action against Citi in July 2015 was coordinated with the Consumer Financial Protection Bureau, which ordered the bank to pay a separate $35 million penalty, plus $700 million in customer restitution.

“Citi cooperated fully with the CFPB and OCC and has taken extensive steps to address each issue that affected customers,” the company said in 2015.

The CFPB's enforcement order against Citi is expected to remain in effect until July 2020.

"We are pleased to have this matter resolved," a Citi spokeswoman said in an email after the OCC announcement.

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