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Regulators hit US Bancorp over BSA/AML compliance

U.S. Bancorp will pay $613 million to resolve Bank Secrecy Act and anti-money laundering issues.

The Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network are penalizing U.S. Bank NA over alleged deficiencies in its Bank Secrecy Act and anti-money laundering, or BSA/AML, compliance. The Justice Department reached an agreement with U.S. Bancorp, under which the company will admit fault and forfeit $528 million. Under the agreement, the U.S. Attorney for the Southern District of New York agreed to defer prosecution of criminal charges for two years, assuming compliance with the agreement.

U.S. Bancorp is additionally under a cease and desist order by the Federal Reserve Board, which hit it with a $15 million penalty.

The OCC fined U.S. Bank $75 million, noting in a press release that "systemic deficiencies in [the bank's] transaction monitoring systems" had been the subject of a consent order back in 2015.

FinCEN assessed a $185 million civil money penalty, criticizing the bank for "willful violations" since 2011. FinCEN Director Kenneth Blanco said the bank had chosen "to manipulate [its] software to cap the number of suspicious activity alerts rather than to increase capacity to comply with anti-money laundering laws." When the bank's internal testing revealed how the alert caps prevented the investigation of thousands of suspicious transactions, U.S. Bank decided to stop testing instead of lifting the caps, the enforcement agency alleged.

The U.S. Attorney for the Southern District of New York also cited a failure to file timely suspicious activity reports related to a convicted racketeer and race car driver Scott Tucker. Tucker allegedly used his U.S. Bank accounts to launder proceeds from an illegal payday lending scheme, through which he extended unlawfully high interest rates. In January 2018, Tucker was sentenced to more than 16 years in prison on counts of racketeering, wire fraud, money laundering and Truth In Lending Act offenses. The bank is accused of failing to flag Tucker's questionable transactions, such as using sham accounts with large amounts of money to spend on his professional Ferrari racing team.

FinCEN's penalty was satisfied by a $70 million payment to the U.S. Treasury Department; the remaining obligation is to be addressed in accordance with the separate Justice Department action. The latter's deferred prosecution agreement, meanwhile, is still subject to court review; the $528 million will be collected through the forfeiture of $453 million and the payment of the OCC's $75 million fine.

In a press release, U.S. Bancorp CEO Andrew Cecere said the actions resolve the company's outstanding BSA/AML compliance issues. There is no financial impact from the actions, as U.S. Bancorp had built up sufficient reserves beforehand.

"We regret and have accepted responsibility for the past deficiencies in our AML program," he added.

While the Minneapolis-based company released few details about its interactions with regulators since the OCC issued its 2015 consent order, executives said in January they were nearing resolution of the BSA/AML issues. The company recognized an accrual of $608 million in the fourth quarter of 2017 for costs associated with legal and regulatory matters, as well as an investigation related to its BSA/AML compliance program. President and CEO Andrew Cecere said during a January earnings call that U.S. Bancorp had completed "all of the systems integration and process and build as well as the people and process at the end of 2017, and we're now in the sustainability phase of it."