WASHINGTON — Wachovia Corp. is expected to be fined $100 million to $200 million this week over its failure to detect suspicious activity on certain Mexican money transfer business accounts.
The fine, which could come as early as Wednesday, involves Wachovia's business with casas de cambio between 2004 and 2007. Regulators could also require the company to conduct a "lookback" of past activity to determine if additional suspicious transactions can be identified.
Wachovia, which is now a unit of Wells Fargo & Co., acknowledged the investigation in a statement Sunday.
"Wachovia Bank is fully cooperating with the federal government regarding this investigation, which involves matters that took place prior to the merger with Wells Fargo," the bank said. "This cooperation has continued since the merger of Wachovia and Wells Fargo. We look forward to resolving this issue, and are committed to maintaining compliant and effective anti-money-laundering policies and practices, and a strong compliance and risk management culture across the integrated organization."
Wachovia alluded to the investigation in its Feb. 26 annual securities filing.
"An investigation is being conducted by the U.S. Attorney's Office for the Southern District of Florida, in conjunction with certain regulators, into, among other matters, Wachovia Bank, N.A.'s prior correspondent banking relationship with certain non-domestic exchange houses and Wachovia Bank, N.A.'s compliance with Bank Secrecy Act and anti-money-laundering requirements," the bank reported.
"Wachovia Bank, N.A. has cooperated fully with the regulators and with the U.S. Attorney's Office's investigation, and is engaged in discussions to resolve this matter by paying penalties and entering into agreements concerning future conduct."
The Justice Department's Southern District of Florida's narcotics group in Miami is conducting the investigation as part of a broad probe over the casa de cambio accounts. The Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network are also expected to jointly issue an action against the bank.
According to press reports, Wachovia built up its casa de cambio business with the Dinero Directo card to facilitate remittance transactions.
Federal agents have seized more than $11 million in 23 Wachovia accounts with the businesses where money is believed to have been laundered, those reports said.
The bank severed its relationship with the Mexican exchange businesses in early 2008.
Casa de cambio accounts are a way to tap into Hispanic customers, but regulators warned of the dangers posed by the accounts in guidelines issued in April 2006. At the time, Fincen said the Mexican exchange houses may not be involved in criminal activity, but U.S. financial institutions should still apply enhanced due diligence. Since then, some banks have severed relationships with the businesses.
In 2007, Union Bank of California was fined $31.6 million by regulators for anti-money laundering violations involving more than a dozen casa de cambio accounts.
The fine came after the bank spent more than $100 million to beef up its anti-money laundering compliance.