Data Dive

Missing The Podium Edition: US Bank, SoFi And Bitcoin On Cards

Not everyone gets a trophy, an inevitable truth discovered by the U.S. Olympic team in Pyeongchang — at least so far.

It’s not been a standout year for the U.S. Olympic team, which, as of the writing of this article, was in 5th place in the medal race, with only 10 podium appearances to call its own.

That’s less than half the count of the current leader — and seemingly unstoppable winter sports force — Norway, with its 26 medals.

The good news, according to statisticians at FiveThirtyEight, is that the U.S. has some of its best events coming up (go bobsleds!). There’s still hope for the home team.

But if one is going to be off the podium, there’s something to be said for at least having company. Last week, there were a few payments players who also didn’t quite stick their landings.


U.S. Bank’s AML Blues  
U.S. Bank has a $613 million civil penalty to pay, care of the Financial Crimes Enforcement Network (FinCEN) in coordination with the Office of the Comptroller of the Currency (OCC) and the U.S. Department of Justice (DOJ).

In a press release, FinCEN noted U.S. Bank owes $70 million of that fine to the Treasury Department, with the remaining amount satisfied by payments from the DOJ.

The fine was levied for what FinCEN described as U.S. Bank knowingly and intentionally breaching the Bank Secrecy Act’s reporting requirements. The firm is accused of failing to flag suspicious activity and inadequately reporting currency transactions in the absence of an adequate anti-money laundering (AML) program with power sufficient to close down suspicious or illegal activity.

The joint contention of FinCEN, the OCC and the DOJ is that U.S. Bank opted to cap the number of alerts its automated transaction monitoring system would generate so the bank would find only a predetermined number of transactions to investigate, without taking into account legitimate alerts that would be lost because of the cap.

“U.S. Bank is being penalized for willfully violating the Bank Secrecy Act and failing to address and report suspicious activity. U.S. Bank chose to manipulate their software to cap the number of suspicious activity alerts rather than to increase capacity to comply with anti-money laundering laws,” said FinCEN Director Kenneth A. Blanco. “U.S. Bank’s own anti-money laundering staff warned against the risk of this alerts-capping strategy, but these warnings were ignored by management. U.S. Bank failed in its duty to protect our financial system against money laundering and [to] provide law enforcement with valuable information.”

The charges come in relationship to Scott Tucker’s massive payday lending empire. Tucker was convicted on over a dozen federal charges in connection to his illegal payday lending operation. He was sentenced on Jan. 5 to 16 years and eight months in prison.

Documents filed in federal court said U.S. Bank willfully failed to report Tucker’s suspicious banking activities, even though the bank had been made aware that his banking practices showed patterns of money laundering.

A U.S. Bank investigator in 2011 told the bank “it looks as though Mr. Tucker is quite the slippery individual” and that he “really does hide behind a bunch of shell companies.”

U.S. Bank closed some of his accounts but continued a banking relationship with Tucker, allowing more than $176 million in deposits from his businesses to go into U.S. Bank accounts.

“Today’s resolution finalizes legacy matters involving our AML compliance program,” said Andy Cecere, president and CEO, U.S. Bank, in a statement. “We regret and have accepted responsibility for the past deficiencies in our AML program. Our culture of ethics and integrity demands that we do better. One of U.S. Bank’s key priorities is to maintain an exceptional AML program, and we are confident in the strength of the program we have in place today.”

Media reports this week further indicated the bank has agreed to settle with the DOJ and pay a total of $613 million for the various fines and penalties.


SoFi’s Late Payments Problem

SoFi has a risk management problem. The FinTech firm recently announced its customer base — long touted for being low risk — has been missing loan payments at a higher-than-expected rate.

Reports this week indicated the online lending platform has missed its own internal targets for Q4, largely driven by the markdown of personal loans.

Credit performance was “lower-than-expected.”

The report cited a letter to shareholders that was reviewed by The Wall Street Journal.

SoFi also noted increased hiring costs and rising expenses — largely due to management changes — also dinged its Q4 performance.

The letter didn’t specify why customers were missing their loan payments, but did say it expects more of the same in 2018. SoFi , by its own internal reporting, is also improving upon its model for determining creditworthiness and is upgrading fraud prevention tools.

The increase in missed loan payments comes as SoFi is transitioning after the departure of founding CEO Mike Cagney. Former Twitter exec and soon-to-be CEO Anthony Noto will officially take the helm on March 1. He has said his first priority will be to improve SoFi’s loan underwriting process.


Coinbase Says No to Credit Cards for Crypto Buys
Buying cryptocurrency with a credit card seems to be going the way of the dodo bird.

Cryptocurrency exchange Coinbase has flipped off the ability to add new credit cards as a payment method for buying crypto in the United States.

In a blog post, the company confirmed debit cards will be unaffected by the change.

The decision, according to the company, was made because the firm can’t ensure customers they will have a successful experience trying to purchase cryptocurrency via credit card, because credit card companies, en masse, have also been saying “no” to using them to buy crypto over the last few weeks.

“We know many customers have added credit cards as their primary payment method; we did not make this decision lightly. We are actively working with card networks and card issuers to find a long-term solution,” Coinbase wrote on its corporate blog.

And while the changes have started in the U.S., it’s not likely to end here.

“For customers in the U.K., EU, Canada, Australia, and Singapore, we are collecting feedback and evaluating similar changes,” Coinbase stated.

For cards already linked — and allowed by the card issuer — Coinbase will permit transactions going forward. The change only effects the ability to add new cards to one’s account.

Coinbase also warned banks could charge cash advance fees for using a credit card to buy cryptocurrencies. To avoid that, the company advised U.S. customers to switch their payment method to a debit card or a bank account.

Banks that have banned crypto purchases via credit cards are Citigroup, Bank of America, JPMorgan Chase, Capital One and Discover.

So, what did we learn this week? You can’t win them all, but it’s always really great to try — particularly when it comes to matters involving money and regulators.



Digital transformation has been forcefully accelerated, but how does that agility translate into the fight against COVID-era attacks and sophisticated identity threats? As millions embrace online everything, preserving digital trust now falls mostly on banks and FIs. Now, advances in identity data and using different weights on the payment mix afford new opportunities to arm organizations and their customers against cyberthreats. From the latest in machine learning for fraud and risk, to corporate treasury teams working in new ways with new datasets, learn from experts how digital identity, together with advances like real-time payments, combine to engender trust and enrich relationships.