Current and former employees of Wells Fargo & Co. revealed that the company had been overcharging customers for foreign-exchange services it offers, The Wall Street Journal reported Nov. 27.
An internal review showed that out of around 300 fee agreements, only about 35 companies were charged with actual prices agreed upon for Wells Fargo's services, the unnamed sources said.
Wells Fargo allegedly charged some of the highest trading fees in the market, WSJ wrote. The rates could go anywhere from 1% to 4%, which are two to eight times higher than middle-market industry averages. Wells Fargo disputed this, however, saying that its fees in 2016 had a weighted average of 0.09 percentage point across all transactions.
The company also allegedly charged unusually high fees for trades with different currency conversions, called Bswift transactions, the publication added.
When customers complain, foreign-exchange bankers, who receive bonuses based on how much revenue they bring in to the company, would blame the heightened fees to "time fluctuations" and difference in market prices at the time of the transaction, a former Wells Fargo manager said.
In October, WSJ reported that federal prosecutors are investigating Wells Fargo's foreign-exchange business in connection to a dispute with Restaurant Brands International, the owner of brands such as Burger King. Wells Fargo refunded around $900,000 to Restaurant Brands, the sources said.
Since then, the company had been making changes in an effort to clean up its name, according to the report. Wells Fargo had changed its compensation plans wherein management would decide the bonuses that would not solely rely on revenues the employees are bringing in.
In October, the company fired four investment banking executives following an internal investigation. The Wall Street Journal also reported that Sara Smith, who led the foreign-exchange division, was moved to lead the company's financial institutions group in the Americans region. Ben Bonner, who was Smith's co-leader, took over and is supervising trading activities in the division.
Examiners from the Office of the Comptroller of the Currency are also auditing Wells Fargo's foreign-exchange business, WSJ wrote. The company said the audit is in the normal course of business.
On Nov. 2, Wells Fargo sent an internal email regarding new guidelines for its Bswift transactions, including specific handling and pricing procedures for such trades, the report added.
