On Thursday, two banking regulators fined the U.S. Federal Savings Bank in San Antonio $140 million for failing to report thousands of suspicious transactions in a timely manner.
The Financial Crime Enforcement Network, or FinCEN, imposed a $140 million fine on USAA Bank, and the Office of the Comptroller of the Currency imposed a $60 million fine.
However, the bank must pay $140 million instead of $200 million because FinCEN agreed to set off the $60 million civil penalty imposed by the OCC.
“As the customer base and revenues have grown in recent years, the US FSB has deliberately failed to enforce its compliance program, which has resulted in millions of dollars of suspicious transactions passing through the US financial system without proper reporting,” said Himamauli, acting director of FinCEN. Das. in a statement.
“The USAA FSB also received sufficient notice and the opportunity to correct its inadequate (anti-money laundering) program, but repeatedly failed to do so,” Das added. “Today’s actions signal that growth and compliance must go hand in hand.”
In an order of compliance with FinCen, the USAA acknowledged willful violation of the Bank Secrecy Act.
“While the issues identified in these orders did not result in harm to individual members, we understand the importance of these requirements,” USAA CEO Wayne Peacock said in a statement.
“Compliance is a top and immediate priority and is fundamental to providing our members with the highest level of service,” he added. “USAA has already made progress in many critical areas by investing in new systems and training, increasing staff and experience, and improving our processes. And we have an unwavering commitment to the military community.”
According to FinCEN’s ruling, USAA Bank’s non-compliance was “pervasive” across all of its businesses and affected all levels of its overall risk management.
“We don’t see such harsh penalties (Bank Secrecy Act) and really egregious actions from the government anymore,” said Kenneth Thomas, a Miami-based banking analyst and president of Community Development Fund Advisor. “It probably won’t get any worse.”
The fines follow actions against the bank in 2019 and 2020 for alleged violations of banking rules.
In October 2020, the OCC fined the bank $85 million for “violations of the law” that were “part of the misconduct.”
The Bank did not recognize or deny violations of banking legislation.
The OCC, which regulates federally registered banks, has found that USAA Bank’s internal controls do not comply with certain rules. The Bank has also failed to implement and maintain a risk management program sufficient for its size.
“The bank has failed to correct problems with its[anti-money laundering]program that the OCC has previously reported to the bank’s management and board of directors,” FinCen said in the order. “Thus, these managers were aware of the violations, but were unable to quickly and effectively address the identified deficiencies.”
In 2019, the Consumer Financial Protection Bureau ordered the bank to pay a $3.5 million fine and $12 million in damages to settle allegations of banking violations.
Following these fines, USAA Bank began to improve risk management and compliance.
No financial danger
The investment resulted in cumulative losses of $710 million over the past two years, the first time the bank has reported a loss in the past two years since its first two full years of operation in 1984 and 1985.
The then fledgling institution, which is several times smaller than it is today, lost a total of $2.3 million in those years. That’s about $6.2 million in today’s dollars.
Despite huge losses, USAA Bank is not in financial danger.
At the end of last year, its assets stood at $117.4 billion, placing it among the top 35 financial institutions in the country.
As part of the FinCEN compliance order, a USAA bank must develop and implement, within 30 days, a written plan detailing the corrective action it will take to comply with the Bank Secrecy Act.
A law passed by Congress in 1970 requires financial institutions to assist US government agencies in detecting and preventing money laundering. Financial institutions must keep records of cash transactions in excess of $10,000 and report suspicious activity that could be money laundering, tax evasion, or other criminal activity.
Both FinCen and OCC are bureaus of the Ministry of Finance.