Wells Fargo Pledges to Fix AML Program After OCC Agreement

Trouble with federal regulators continues for Wells Fargo.

The Office of the Comptroller of the Currency (OCC) said Thursday (Sept. 12) that it has signed a formal agreement with the bank to rectify deficiencies in its anti-money laundering (AML) and financial crimes risk management practices.

“The Formal Agreement identifies deficiencies relating to the bank’s financial crimes risk management practices and anti-money laundering internal controls in several areas including suspicious activity and currency transaction reporting, customer due diligence, and the bank’s customer identification and beneficial ownership programs,” the federal agency said. These deficiencies, the document stated, have also resulted in violations of various laws and regulations.

The agreement also referred to the need to “remedy the deficiencies identified by the OCC.” It outlined a detailed plan for Wells Fargo to address and correct these shortcomings, including specific articles dedicated to enhancing various aspects of their AML program.

Wells Fargo acknowledged the changes it needed to implement.

“We have been working to address a substantial portion of what’s required in the formal agreement, and we are committed to completing the work with the same sense of urgency as our other regulatory commitments,” the bank said in a Thursday statement.

In 2018, the Federal Reserve imposed an asset cap on Wells Fargo, limiting its growth, due to a series of widespread consumer abuses. This cap remains in place today. The bank has been working to address those issues and improve its governance and controls in hopes of having the cap lifted.

However, the existence of this new agreement with the OCC, which highlights ongoing compliance problems, could complicate those efforts. It signals to regulators that the bank still has significant work to do to ensure proper risk management and compliance, which might make them hesitant to remove the asset cap in the near future.

According to a CNBC report, Chris Marinac, director of research at financial adviser Janney Montgomery Scott, said: “The bank has been going through a clean-up process for years, and the latest move by OCC shows that it is still very much under investigation, and I would expect that to continue.”

The agreement mandates the establishment of a Compliance Committee to oversee the Wells Fargo’s compliance with its terms. Additionally, the bank is required to submit an action plan detailing remedial measures within 120 days. The plan, according to the agreement, should cover areas like front-line risk management, independent risk management, independent testing, customer identification and suspicious activity identification.

Additionally, Wells Fargo must enhance its risk assessments, establish a data integrity program and improve its compliance program. The agreement also restricts Wells Fargo from expanding into new products, services or markets without prior OCC approval until it has adequately addressed the identified deficiencies.

The document concluded with standard clauses on jurisdiction, general board responsibilities and other provisions. It emphasized that the agreement is not a binding contract on the OCC but an exercise of its supervisory powers. Wells Fargo must submit all required reports and plans to the examiner-in-charge, and any amendments to the agreement must be in writing and approved by the OCC.