Capital One Fined Millions in Money-Laundering Case


The US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) imposed a fine of $390 million against Capital one (COF) last week, claiming that the financial powerhouse had admitted to “deliberately failing to implement and maintain” an effective system fight against money laundering program.

Key points to remember

  • Capital One paid a $290 million fine (following an earlier $100 million fine) and admitted anti-money laundering control failures cited by the US Treasury’s Financial Crimes Enforcement Network.
  • The government says Capital One deliberately ignored its obligations under the law in a high-risk check cashing business unit it has since left.
  • Capital One has strengthened its compliance processes and invested heavily in anti-money laundering controls.
  • Capital One’s banking and credit card operations are unaffected.

What are the details?

The FinCEN rating, announced Jan. 15, stems from a now-defunct small portfolio of check cashing businesses that Capital One inherited through an acquisition and then exited in 2014. From 2008 to At least in 2014, Capital One provided banking services to a group of 90 to 150 check cashers, operating primarily in storefronts in New York and New Jersey. 

FinCEN says Capital One was aware of the warnings from regulators, criminal charges against some of the customers, and internal assessments that ranked most of the customers in the bank’s top 100 riskiest money laundering customers. silver. Despite this information, according to the agency, Capital One often failed to detect and report suspicious activity by check cashers.

The bank admitted it failed to file thousands of suspicious activity reports and failed to file currency transaction reports on approximately 50,000 reportable cash transactions totaling more than $16 billion in cash .

FinCEN Director Kenneth Blanco called the violations “gross”, adding that Capital One’s failures “put our nation and our people at risk” by depriving law enforcement of such information.

Blanco further warned that “these types of failures by financial institutions, regardless of their size and presumed influence, will not be tolerated.”

Matt Kelly, editor of Radical Compliance, an industry newsletter that tracks regulatory enforcement against banks, says the action may highlight a fundamental misstep in the chain of command. internal compliance. “The big takeaway here is that again we see regulators imposing sanctions on a bank because it gave operations managers too much power when dealing with misconduct issues, and not enough. compliance teams who are supposed to help a bank avoid misconduct,” he says. “We have seen several other enforcement actions over the past six months where, although the exact misconduct in question was quite different, the common theme was that compliance teams did not have enough autonomy and power to force the bank to deal with difficult issues. .”

Capital One makes amends

FinCEN acknowledged that Capital One took significant steps to cooperate with its investigation and resolve the issues, which it considered in calculating the fine. The civil fine totaled $390 million, but Capital One was credited $100 million for a fine it paid to the Office of the Comptroller of the Currency in 2018 in a related case. The $390 million fine represents less than 0.1% of the bank’s approximately $420 billion in assets.

A Capital One spokesperson told Investopedia that the McLean, Va.-based company is happy to resolve the case, calling it the latest government investigation into a now-defunct company. The bank was fully reserved for this resolution and has already paid the FinCEN sanction with no further financial impact.

“Capital One takes its anti-money laundering obligations very seriously,” the spokesperson said. “The bank has invested heavily in improving its AML program over the past few years under new AML leadership, and has worked closely with regulators and law enforcement to ensure our compliance processes and protocols are solid and thorough.”

As part of these efforts, Capital One self-reported and back-reported over 50,000 unreported currency transaction reports (CTR) and voluntarily rolled back transactions not previously entered.

Among the nation’s eight largest retail banks, Capital One ranked #1 in customer satisfaction, in JD Power’s 2020 U.S. National Bank Satisfaction Study. CapitalOne.com is one of the most visited financial services websites and the company’s share of the U.S. credit card market grew to 10.52% in 2019, the latest notes. count of the Nilson report.

Despite Capital One’s current standing with existing consumers, the impact on public perception and the integrity of the financial services giant’s brand remains to be seen.

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