Financial Institution Fraud

May 12, 2023

HSBC Bank USA, N.A., HSBC Securities (USA) Inc., and HSBC Bank plc (collectively HSBC Affiliates) have been ordered to pay $30 million to the CFTC and $15 million to the SEC to settle charges of violating recordkeeping and supervisory requirements.  As part of the settlement, HSBC Affiliates admitted that it failed to stop employees from communicating internally and externally through unapproved mediums, and failed to preserve those messages as business records even if they pertained to the businesses.  CFTC; SEC

May 11, 2023

The Bank of Nova Scotia and Scotia Capital USA Inc. (collectively BNS Affiliates) have been ordered to pay $15 million to the CFTC and $7.5 million to the SEC to settle charges of violating recordkeeping and supervisory requirements.  BNS Affiliates admitted that its employees often communicated internally and externally through unapproved channels, and though some messages pertained to the businesses, failed to preserve those messages as records, and would be unable to produce them if requested.  CFTC; SEC

January 24, 2023

Popular Bank was fined $2.3 million by the Federal Reserve Board following an investigation into its processing of Paycheck Protection Program loans.  Popular Bank was approved as a PPP lender by the Small Business Administration, and was required to follow the Bank Secrecy Act and program guidelines, including verification of customer identity and the documentation, investigation, and reporting of suspicious activities.  The Board’s Consent Order found that in August 2020, the Bank processed and funded six PPP loans, totaling approximately $1.1 million, despite having detected that the loan applications contained significant indicia of potential fraud.  The Bank self-reported to the Board.  Fed

January 23, 2023

Bloomberg Finance L.P. has been ordered to pay $5 million to settle charges of making misleading disclosures related to BVAL, a paid subscription service that provides daily price valuations for fixed-income securities.  According to the order, Bloomberg failed to disclose that its valuations for certain fixed-income securities did not adhere to previously disclosed methodologies.  Financial service entities that relied on such valuations, including mutual funds, were impacted by the misleading disclosures.  SEC

December 20, 2022

Wells Fargo will pay a $1.7 billion penalty, and more than $2 billion in consumer restitution, following findings by the CFPB that the bank engaged in unlawful conduct including the imposition of improper fees and interest charges on auto and mortgage loans, misapplication of payments on such loans, and the imposition of unlawful surprise overdraft fees.  Wells Fargo’s failures in its servicing of auto loans resulted in the wrongful repossession of borrowers’ vehicles, and its improper denial of mortgage modifications led to some customers losing their homes to wrongful foreclosures.  According to the CFPB, the bank knew about problems in its account management and servicing for years before it took steps to correct them.  CFPB

December 13, 2022

Danske Bank will pay over $2 billion to resolve charges from the SEC and DOJ arising from failures in its anti-money laundering compliance program at an Estonian bank it acquired and began operating as a branch in 2007, and from its failure to disclose the risks posed by the program’s significant deficiencies.  Danske Bank had received information from an internal whistleblower, conducted internal audits, and received information from regulators, from which it knew that the Estonian branch served high-risk customers, including many Russians, who were engaged in billions of dollars in suspicious and potentially criminal transactions; that its internal policies were inadequate; and, that its AML and KYC procedures were not being followed.  Despite this knowledge, the bank made materially misleading statements and omissions that it complied with its AML obligations and that it had effectively managed its AML risks.  These statements mislead investors and U.S. banks and allowed its high-risk customers to gain unlawful access to the U.S. financial system.  Danske agreed to pay an SEC penalty of $413 million and, as part of a criminal plea to conspiracy to commit bank fraud, will forfeit over $2 billion, with $850 million of that amount being credited from separate criminal or civil resolutions with foreign and domestic authorities, including the SEC.  DOJ, SEC, SDNY

November 21, 2022

Todd and Julie Chrisley, married television personalities and newly-convicted fraudsters, will spend 12 and 7 years in federal prison, respectively, for conspiracy to commit bank fraud, bank fraud, wire fraud, and conspiracy to commit tax evasion. The Chrisleys defrauded Atlanta-area community banks to obtain more than $36 million in personal loans by submitting false banking and personal financial statements. After funding their lavish, undeserved lifestyle with the multi-million-dollar loans, Todd Chrisley filed bankruptcy, walking away from over $20 million in loans. Both before and during the trial, the Chrisleys attempted to obstruct justice, including by submitting a fraudulent document in response to a grand jury subpoena. In addition to serving time in prison, the Chrisleys will be required to pay restitution in an amount to be determined later. USAO NDGA

October 21, 2022

Mattel Inc. has agreed to pay $3.5 million to settle charges of making material misstatements in its third and fourth quarter 2017 financial statements.  The toy manufacturer was found to have understated its third quarter tax valuation allowance by $109 million and overstated its fourth quarter tax expense by the same amount, resulting in a net loss and net loss per share that was understated by 15% and overstated by 63% respectively.  In connection with this action, the SEC launched an investigation into a former audit partner at Pricewaterhouse Coopers LLP, Joshua Abrahams, for the audit failure.  SEC