In June 2013, U.S. Bank’s monitoring systems raised more than 57,000 alerts for suspicious activity. Investigators looked at 100 of them.
That gap sits at the center of the deferred prosecution agreement U.S. Bancorp signed with the Justice Department on February 12, 2018. The parent of U.S. Bank, the fifth largest bank in the United States, agreed to penalties of $613 million for failing to maintain an adequate anti-money laundering program.
The admissions
In the agreement, the bank accepted responsibility for “wilfully failing to maintain an adequate anti-money laundering program” and for “wilfully failing to file a Suspicious Activity Report,” both breaches of the Bank Secrecy Act. Prosecutors said it missed and did not report transactions that should have set off alarms as early as 2009.
The best-known case involved Scott Tucker, a long-time customer. Tucker was convicted of using several U.S. Bank accounts to launder over $2-billion in proceeds from fraudulent payday lending, and the bank never reported his suspicious banking.
Prosecutors blamed two things. One was staffing. The bank, with over $340-billion in assets, employed only 25-30 AML investigators, many on below-market pay and some with little or no AML experience. The other was a practice of capping alerts. U.S. Bank admitted it limited the number its monitoring systems generated according to its staffing and resources, so the 57,000 alerts that month produced just 100 investigations.
Its Chief Compliance Officer then hid the practice from the Office of the Comptroller of the Currency, the bank’s main regulator.
The bank also fell short on below-threshold testing, which measures how much suspicious activity occurs under the alert thresholds. Its results showed high levels, which should have led it to lower the threshold. Instead U.S. Bank ended the testing altogether, citing limited resources.
Terms of the deal
The agreement runs two years. The bank must pay approximately $613-million in penalties and settlements, reform its AML compliance and monitoring programs, and cooperate with the investigation, among other conditions.
