May 17, 2018 1:36 pm
Some employees in a Wells Fargo WFC -1.33% & Co. unit that handles business banking improperly altered information on documents related to corporate customers, according to people familiar with the matter.
The behavior again raises questions about Wells Fargo’s risk-management practices and controls. The bank has been sanctioned in recent months by federal regulators for problems in these areas and as a result can’t grow its balance sheet.
The employees in Wells Fargo’s so-called wholesale unit, which is separate from its retail bank, added or altered information without customers’ knowledge, according to the people familiar with the matter. The information added varied from social security numbers to addresses to dates of birth for people associated with business-banking clients, the people said.
The behavior took place in 2017 and early 2018 as Wells Fargo was trying to meet a deadline to comply with a regulatory consent order related to the bank’s anti-money-laundering controls, the people said. The employees were also working to get documents in order prior to new requirements from another regulator for disclosures related to proof of beneficial ownership of businesses, the people added.
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Wells Fargo became aware of the behavior in recent months from employees, the people said. After investigating, the bank discovered the behavior wasn’t an isolated incident, the people added. The bank is still investigating the matter, one of these people said.
Wells Fargo has reported the problem to the Office of the Comptroller of the Currency, one of its main federal regulators, the people said. That agency is probing the problem, according to a person familiar with the matter.
A Wells Fargo spokesman said the bank doesn’t comment on regulatory matters. He said in a statement: “This matter involves documents used for internal purposes. No customers were negatively impacted, no data left the company, and no products or services were sold as a result.”
The spokesman added: “Over the past several months we’ve built more robust internal processes that reinforce our values, and if we find any situations where behavior violates those values, we take swift action to correct.”
The altering of information within the business-banking division of Wells Fargo, which serves small firms with annual sales ranging from $5 million to $20 million, comes as the bank is continuing to grapple with the fallout from the sales-practices scandal that erupted in September 2016. That involved bank employees fabricating information to open as many as 3.5 million accounts without customers’ knowledge or authorization.
Regulators have subsequently sanctioned the bank as more problems have emerged. Wells Fargo agreed to a $1 billion settlement with two of its main regulators in April, which forced the bank to adjust reported first-quarter earnings by $800 million. The settlement focused on risk-management failures that led to improper charges to mortgage and auto-lending customers.
Separately, in February, the Federal Reserve slapped the bank with an unprecedented sanction—capping its ability to grow—due to what it said were inadequate risk controls.
The bank had initially indicated that reviews related to the growth cap would be completed by Sept. 30, followed by final signoff from the Fed. But Chief Executive Timothy Sloan said at the bank’s recent investor day that the sanction would remain in place until the first part of 2019.
Earlier in May, Wells Fargo named JPMorgan Chase & Co. risk-management executive Amanda Norton as its new chief risk officer, beginning this summer. Wells Fargo is rolling out a new risk-management framework designed by a consultant after regulators informally disapproved of previous plans.
Wells Fargo also in May formally asked the OCC for an extension beyond the initial June 30 deadline of the 2015 consent order related to its anti-money-laundering controls, some of the people familiar with the matter said.
At the time of the original 2015 action, Wells Fargo had more than 100,000 customer accounts it needed to verify with thousands requiring more specific work, The Wall Street Journal reported in April. Over the past year or so, the bank has been reaching out to thousands of clients requesting updated documentation. Wells Fargo needs those documents to keep those clients.
It was during this work that some employees altered client information on documents, people familiar with the matter said.
Besides the consent order, the bank’s efforts regarding documentation for business customers had become even more challenging due to new rules from another regulator—the Treasury Department’s Financial Crimes Enforcement Network. Those rules, which kicked in this month, require more stringent disclosure around the beneficial ownership of legal entities.
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This post was written by All Charts News