USB US Bancorp

By Christina Rexrode 

U.S. Bancorp, the biggest regional bank in the country, was fined $613 million Thursday for what regulators and prosecutors said were shoddy anti-money-laundering controls.

The U.S. attorney's office in Manhattan also announced criminal charges against the bank that would be deferred for two years under a prosecution agreement. The U.S. Attorney, Geoffrey Berman, said the bank's poor controls had allowed a former customer, race-car driver Scott Tucker, to launder money from an illegal payday-lending scheme. Mr. Tucker was convicted of fraud last year.

Banks are required to have controls to prevent their systems from being used for illegal purposes, and to report suspicious activity to the government. But the government said that U.S. Bank had operated its program "on the cheap" with inadequate staffing and resources, which caused it to miss red flags of some of its customers' activities.

One of those customers was Mr. Tucker. According to prosecutors, from 2011 to 2013, the bank failed to appropriately report that Mr. Tucker had been using sham bank accounts opened under the names of companies connected to Native American tribes. Prosecutors said the bank disregarded numerous warning signs that Mr. Tucker was using the tribes to hide his ownership of the accounts. For example, prosecutors said, Mr. Tucker used money from the accounts on personal items such as a vacation home in Aspen and his professional Ferrari racing team.

After news reports of Mr. Tucker's questionable business practices in 2011, U.S. Bank closed the accounts but didn't file a suspicious activity report, prosecutors said. It also left open other accounts belonging to Mr. Tucker.

The agreement with prosecutors included a so-called deferred prosecution agreement, under which the bank must continue to improve its anti-money-laundering program. In exchange, the government could in two years seek to dismiss the charges. The Justice Department agreement also required the bank to agree to a statement of facts about its conduct.

The bank also announced settlements or agreements with the Federal Reserve, the Office of the Comptroller of the Currency and the U.S. Treasury's Financial Crimes Enforcement Network. Prosecutors said Thursday that the bank had put a cap on the number of transactions subject to anti-money-laundering review, and had concealed that method from the OCC.

The fines and penalties included a forfeiture of $453 million related to the Justice Department agreement, a $15 million penalty from the Federal Reserve, a $75 million penalty from the OCC, and a $70 million penalty from FinCEN.

The bank's chief executive, Andy Cecere, said in a statement that "We regret and have accepted responsibility for the past deficiencies in our" anti-money-laundering program. The bank also said it had installed a new leadership team over anti-money-laundering programs and taken other steps, including improved training.

Write to Christina Rexrode at christina.rexrode@wsj.com

(END) Dow Jones Newswires

February 15, 2018 12:33 ET (17:33 GMT)

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