Financial Institution Fraud

May 19, 2020

Payment processing company First Data Merchant Services, LLC will pay $40.2 million to resolve FTC charges that it laundered, or assisted laundering of, credit card transactions for scams facilitated by Chi “Vincent” Ko and his company First Pay Solutions LLC, which operated as an independent sales agent for First Data.  Ko allegedly opened hundreds of merchant accounts to process payments for scams that targeted hundreds of thousands of consumers, and First Data knowingly processed payments for those scams.  FTC

May 19, 2020

The country’s largest subprime auto financing company, Santander Consumer USA Inc, has agreed to pay over $550 million to resolve allegations of violating consumer protection laws by knowingly placing consumers in auto loans that the company expected would default at a rate of over 70%.  Under the settlement, affected consumers in 34 states who defaulted on loans between 2010 and 2019 will receive restitution.  Additionally, Santander has agreed to various relief efforts, including transferring titles and waiving balances for consumers who defaulted on loans and had not had their cars repossessed yet, waiving balances or debt still owed even on cars already repossessed, and helping to repair consumer credit scores.  CA AG; NY AG; VA AG

April 30, 2020

Entities of Israeli banking conglomerate Bank Hapoalim have pleaded guilty and entered into civil settlements for their role in a money laundering scheme for bribes made to soccer officials with Fédération Internationale de Football Association (FIFA) and others in exchange for preferences including in the award of soccer match broadcasting rights.  As part of three-year non-prosecution agreement, the bank will forfeit $20.73 million, pay a fine of $9.33 million, and undertake specified remedial and compliance efforts. The bank simultaneously entered into a separate settlement regarding tax evasion.  DOJ; USAO EDNY

April 29, 2020

Lender Guaranteed Rate, Inc. will pay $15.1 million to resolve allegations that it knowingly failed to adhere to material program requirements in originating and underwriting mortgages insured by FHA or guaranteed by the VA, resulting in mortgages that did not meet credit and underwriting requirements for the government-sponsored guarantees and insurance.  The case was initiated by a whistleblower complaint filed under the False Claims Act by an unnamed former Guaranteed Rate employee, who will receive $2.4 million of the settlement proceeds.  The settlement also resolved claims under FIRREA.  DOJ; USAO NDNY

April 20, 2020

The Industrial Bank of Korea will pay $86 million as part of a deferred prosecution agreement resolving claims arising from the bank’s processing of more than $1 billion of transactions between Korean entities to Iranian entities in violation of economic sanctions law under the International Emergency Economic Powers Act. The bank admitted that it failed to institute an adequate and effective anti-money laundering program despite repeated warnings by its New-York based compliance officer.  The bank will pay a $35 million to the State of New York and forfeit $51 million to the U.S.  USAO SDNY; NY

April 6, 2020

Cantor Fitzgerald & Co. has agreed to pay $3.2 million to settle charges of willfully providing the SEC with incomplete and inaccurate securities trading information, also known as “blue sheet data,” for approximately 35 million transactions, over the course of five years.  Because the SEC uses that information to investigate insider trading and other fraudulent activity, Cantor Fitzgerald’s actions prevented the SEC from carrying out its duty to protect investors.  Cantor Fitzgerald has since retained an outside consultant and adopted new policies and procedures relating to the proper submission of blue sheet data.  SEC

February 27, 2020

Wells Fargo Clearing Services and Wells Fargo Advisors Financial Network will pay a $35 million penalty to resolve charges that certain of Wells Fargo's investment advisors and registered representatives made unsuitable recommendations to retail clients regarding single-inverse ETF products.  The SEC charged that Wells Fargo lacked policies and procedures that would have detected such unsuitable recommendations, and failed to adequately supervise and train its financial professionals, who did not fully understand the products they were recommending.  Wells Fargo did not admit or deny the SEC's findings; the penalty will be distributed to harmed individuals.  SEC

February 21, 2020

Wells Fargo & Co. will pay a total of $3 billion in a federal settlement resolving criminal, civil, and administrative liability with respect to its “cross-selling” sales practices between 2002 and 2016 that led to the opening of millions of checking, savings, credit card, and other accounts on behalf of individual customers under false pretenses or without the customers’ consent.  As part of the settlement, Wells Fargo admitted that it collected millions of dollars in fees and interest to which the Company was not entitled, harmed customer credit ratings, and unlawfully misused customers’ personal information.  Wells Fargo entered into a three-year deferred prosecution agreement requiring the bank to take certain compliance steps and cooperate with ongoing investigations.  Of the $3 billion settlement, $500 million resolves SEC claims that the bank, knowing about the underlying violations, mislead investors about the success of its business; the SEC settlement will be distributed to harmed investors.  The federal settlement is in addition to a $575 million 2018 settlement Wells Fargo entered into with 50 states and the District of Columbia and a $100 million 2016 fine from the CFPB arising from the same conduct.  DOJ; SEC; WD NC; CD Cal