DOJ Seeks Jail Time for Ex-Wells Fargo Exec Over Fake Accounts

Federal prosecutors want Wells Fargo’s former retail banking head to spend time behind bars.

Carrie Tolstedt agreed earlier this year to plead guilty to obstructing an investigation into her bank’s practice of opening accounts for millions of customers without their consent.

And a Bloomberg News report Saturday (Sept. 2) — citing court documents — says prosecutors believe she should serve a year in jail.

Tolstedt “attempted to conceal from regulators one of the biggest banking scandals in modern history,” prosecutors with the U.S. Attorney’s Office in Los Angeles said in the filing. “Corporate wrongdoers must be sent a clear message that maintaining a lucrative position through criminal behavior is not worth the risk.”

According to the report, the prosecution’s argument goes against a recommendation by the U.S. Probation Office that Tolstedt serve three years on probation. 

In 2020, Wells Fargo paid the government $3 billion in penalties for opening checking and credit accounts without customers’ authorization to meet aggressive sales goals. The bank later said it found its workers may have set up 3.5 million fake accounts. 

Prosecutors say Tolstedt held up a probe by the Office of the Comptroller of the Currency by failing to share the number of employees who were either fired or quit amid the investigation or that Wells Fargo made a point to only look into a small number of workers engaged in misconduct.

Last week, PYMNTS examined how federal scrutiny of the banking sector may lead banks to turn to alternative data sources and providers, such as FinTechs, for help.

In a recent interview here, Charles Zhu, vice president of product at Enigma, noted that the Financial Crimes Enforcement Network (FinCEN) is at work on rules that will govern the data that must be collected regarding ultimate beneficial owners — or anyone who holds more than a 25% stake in a business. 

“This is a really rapid pace of regulation,” he said. The amount of money already being shelled out on compliance is noteworthy, with Zhu estimating that many banks invest up to 5% of revenues on dealing with compliance matters. 

Historically, he said, many FIs have tried to conduct all of their know your business (KYB) and know your customer (KYC) activities in-house. However, the collaborative approach can ease some of the heavy lifting involved.

Among the examples of digitization efforts in the onboarding space is the platform launched earlier this year by Virtusa and Thought Machine to help financial institutions onboard small- to medium-sized businesses (SMBs).