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Wells Fargo (NYSE:WFC) has agreed to enhance its anti-money-laundering (AML) and sanctions-risk management practices after the Office of the Comptroller of the Currency (OCC) flagged deficiencies in the bank’s current compliance programs. Announced on Thursday, the agreement requires Wells Fargo to obtain OCC approval for assessing the AML and sanctions risks of new products and services before expanding offerings.
New Compliance Committee Established
As part of the agreement, Wells Fargo’s board must establish a compliance committee consisting of at least three members, with the majority being independent of the company. This committee will oversee the bank’s adherence to the new regulatory requirements and ensure that the bank’s AML and sanctions-risk management practices meet the standards set by the OCC.
Key Deficiencies Identified
The OCC highlighted several areas where Wells Fargo’s programs fell short. These included lapses in reporting suspicious activity and currency transactions, insufficient due diligence on customers, and weaknesses in customer identification and beneficial ownership verification programs. These gaps pose significant risks, particularly given the bank’s ongoing efforts to rebuild its reputation after past scandals.
Wells Fargo Responds to Regulatory Demands
Wells Fargo acknowledged the OCC's findings and stated that it is working to address a substantial portion of the issues outlined in the agreement. "We are committed to completing the work with the same sense of urgency as our other regulatory commitments," the bank said. Despite the compliance setbacks, Wells Fargo aims to enhance its systems to prevent financial crimes more effectively.
A Troubled Past of Regulatory Failures
Wells Fargo's challenges with regulatory compliance are not new. The bank has struggled with financial crime monitoring, which has hampered its recovery from previous scandals. Just last November, regulators issued formal orders demanding improvements to Wells Fargo’s consumer protection systems after a lawsuit accused the bank of facilitating an alleged $490 million Ponzi scheme.
Years earlier, the OCC admitted its own shortcomings in identifying Wells Fargo's notorious sales practices that led to a $185 million fine in 2016. The scandal involved the creation of approximately two million unauthorized customer accounts, further damaging the bank's reputation. In 2018, Wells Fargo faced a $1 billion settlement for misconduct in its auto- and mortgage-lending businesses, including improper charges to consumers and failure to address systemic issues.
