Report: Regulators Issue Formal Orders to Wells Fargo to Enhance Monitoring

Wells Fargo is reportedly grappling with regulatory obligations to enhance its monitoring of financial crime.

Regulators have issued formal orders to Wells Fargo, instructing the bank to bolster its ability to detect and prevent criminals from exploiting its accounts or products, The Wall Street Journal (WSJ) reported Thursday (Nov. 16), citing unnamed sources.

Wells Fargo did not immediately reply to PYMNTS’ request for comment.

The orders primarily focus on the bank’s consumer-watching systems, rather than any specific client or event, according to the report. However, a recent lawsuit alleges that the bank allowed a $490 million Ponzi scheme to operate, shedding light on the potential consequences when monitoring systems fail.

In response to the lawsuit, Wells Fargo has rebutted the allegations and emphasized its cooperation with law enforcement officials during the investigation, the report said.

Banks play a crucial role in monitoring money movements to prevent crimes such as money laundering and terrorism, per the report. Nevertheless, regulators have privately criticized Wells Fargo multiple times since early last year for its inadequate oversight of criminal activity within its consumer bank.

To address these concerns, Wells Fargo has been working to rebuild its risk and control apparatus, according to the report. This includes the replacement of its executive responsible for compliance with the Bank Secrecy Act, which mandates banks to maintain records and file reports related to illegal activity. The bank is also taking proactive measures to enhance its risk management practices and prevent future problems.

The bank’s troubles began in 2016 when it was revealed that employees had created millions of fake customer accounts to meet sales goals, the report said. This led to heightened scrutiny and regulatory action, including a cap on the size of the bank’s balance sheet imposed by the Federal Reserve.

It was reported in September that Wells Fargo would pay $1 billion to settle an investor lawsuit tied to its “fake accounts” scandal. That settlement brought the amount the bank has agreed to pay in connection with the scandal to close to $5 billion.

In addition to the regulatory challenges, Wells Fargo is also facing a lawsuit related to the alleged Ponzi scheme, the Thursday WSJ report said. The lawsuit alleges that the bank failed to halt the scheme, which involved the perpetrator channeling money through a Wells Fargo account.

Wells Fargo has denied any wrongdoing in connection with the Ponzi scheme and has stated that it had no knowledge of the alleged fraudulent activities, per the report.