USAA Bank of San Antonio fined $140 million by banking regulators

Two banking regulators on Thursday fined San Antonio-based USAA Federal Savings Bank $140 million for failing to timely report thousands of suspicious transactions by its customers.

The Financial Crimes Enforcement Network (FinCEN) fined USAA Bank $140 million, while the Office of the Comptroller of the Currency fined $60 million.

However, the bank must pay $140 million instead of $200 million because FinCEN agreed to credit the $60 million civil penalty imposed by the OCC.

“While its customer base and revenues have grown in recent years, the USAA FSB has deliberately failed to ensure its compliance program keeps pace, resulting in millions of dollars in suspicious transactions flowing through the system. U.S. financier without proper reporting,” Acting FinCEN Director Himamauli Das said. in a report.

“USAA FSB was also given adequate notice and an opportunity to remedy its inadequate (anti-money laundering) program, but repeatedly failed to do so,” Das added. “Today’s action signals that growth and compliance must go hand in hand.”

In the consent order with FinCen, the USAA admitted to knowingly violating bank secrecy law.

“While the issues identified in these orders have caused no harm to individual members, we understand the importance of these requirements,” USAA CEO Wayne Peacock said in a statement.

“Compliance is an absolute and urgent priority that 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, building staff and expertise, and improving our processes. And we have an unwavering commitment to the military community.

USAA Bank’s compliance failures were “pervasive” across its lines of business and affected all layers of its overall risk management, according to FinCEN’s consent order.

“We don’t see those kinds of heavy penalties (Bank Secrecy Act) and those kinds of really egregious actions claimed by the government anymore,” said Kenneth Thomas, a Miami-based banking analyst and president of Community Development Fund Advisor. “It probably won’t get much worse.”

The sanctions follow actions against the bank in 2019 and 2020 for alleged breaches of banking regulations.

In October 2020, the OCC fined the bank $85 million for “violations of the law” that were “part of a pattern of misconduct.” The bank has neither admitted nor denied violating banking laws.

The OCC, which regulates federally chartered banks, found that USAA Bank’s internal controls failed to meet certain guidelines. The bank also failed to implement and maintain a risk management program sufficient for its size.

“The Bank has failed to correct issues with its (anti-money laundering) program that the OCC had previously reported to Bank management and the Board of Directors,” the order said. consent of FinCen. “These officials therefore had knowledge of the violations, but they failed to quickly and effectively address the deficiencies identified.”

In 2019, the Consumer Financial Protection Bureau ordered the bank to pay a $3.5 million fine and $12 million in restitution to settle charges of violating banking laws.

USAA Bank began to strengthen its risk management and regulatory compliance in the wake of those fines, she said.

The investment contributed to combined losses of $710 million over the past two years, the first time the bank has posted losses in consecutive years since its first two full years of operation in 1984 and 1985. The then fledgling institution, a fraction of the size it is today, lost a total of $2.3 million in those years. That’s about $6.2 million in today’s dollars.

Despite the huge losses, USAA Bank is not in financial danger.

It had $117.4 billion in assets at the end of last year, ranking it among the 35 largest financial institutions in the country.

As part of the consent order with FinCEN, USAA Bank must develop and implement within 30 days a written plan detailing the corrective actions it will take to comply with the bank secrecy law.

The law, passed by Congress in 1970, requires financial institutions to help US government agencies detect and prevent money laundering. Financial institutions must keep records of cash transactions over $10,000 and report any suspicious activity that could signify money laundering, tax evasion, or other criminal activity.

Both FinCen and OCC are offices of the Treasury Department.

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