The Federal Reserve and New York Department of Financial Services Fine US Bank $29.5 Million for Violating Bank Secrecy Act
The Federal Reserve and the New York Department of Financial Services have imposed a hefty fine on Metropolitan Commercial Bank (MCB) for breaching the Bank Secrecy Act. The bank will pay a total of $29.5 million in penalties as a result of allowing criminals to open new accounts and misdirect $300 million.
Inadequate Verification Process Leads to Massive Fraud
According to the New York Department of Financial Services, MCB issued its MovoCash digital prepaid visa card program to fraudulent individuals in 2020 because it did not employ an effective verification process to verify their true identities. These criminals then used their accounts to redirect millions of dollars in direct deposit payroll payments and government benefits.
The department stated, “MCB failed to prevent a massive, ongoing fraud in the MovoCash prepaid card program, allowing bad actors to abuse the financial system… [MCB] observed a surge of fraudulent MovoCash account openings, and after failing to remedy the problem, allowed new MovoCash accounts to be opened. This inaction allowed the fraud to increase exponentially over the next few months and facilitated more than $300 million in pandemic unemployment benefits to be misdirected to the MovoCash accounts of fraud actors.”
Forced Improvements by Federal Reserve
The Federal Reserve is now mandating that MCB enhance its customer identification, customer due diligence, and third-party risk management programs.
About Metropolitan Commercial Bank
MCB has a total asset value of $6.683 billion and operates seven branches across New York.
Hot Take: Billion-Dollar Bank Fined for Allowing Massive Fraud
The Federal Reserve and the New York Department of Financial Services have taken decisive action against Metropolitan Commercial Bank for its failure to prevent a massive fraud. The bank’s inadequate verification process allowed criminals to open accounts and redirect $300 million in funds. This incident highlights the importance of robust identification and risk management protocols to protect against fraudulent activities in the financial system.
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