Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Posts Tagged ‘banking

Additional penalties for Wells Fargo and former executives over the fake-account fiasco.

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Concord coach, from the days when Wells Fargo was the undisputed gold standard of honesty and integrity. Photo at Wells Fargo’s San Diego museum by James Ulvog.

The wheels of justice grind slowly, but grind they do.

Wells Fargo agreed to pay the feds three billion dollars for the fake account fiasco. Actually, the board agreed to hand over stockholder’s money.

Also, the feds (specifically OCC) laid sanctions on seven former executives of the bank for their role in the fake account mess.

2/21/20 – Wall Street Journal – Wells Fargo Reaches Settlement With Government Over Fake-Accounts Scandal.  To settle with the SEC and U.S. Department of Justice for the fake-account fiasco, the bank will pay $3 billion.

For those keeping score at home of bank disasters (like me) this settlement is only with the SEC and DoJ and only for the fake account scandal.

The bank also accepted a deferred prosecution agreement and will continue cooperating with the feds over the fake-accounts mess for another three years.

Running total of fines and penalties

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Written by Jim Ulvog

February 22, 2020, 9:13 am at 9:13 am

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Efforts continuing to clean up fake account fiasco at Wells Fargo

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October 2016 photo at Wells Fargo's museum in San Diego by James Ulvog.

October 2016 photo at Wells Fargo’s museum in San Diego by James Ulvog.

There haven’t been a lot of high-profile articles about the Wells Fargo fake account fiasco recently. I’ve noticed a number of articles though, which suggest there is ongoing activity addressing the intentional, systemic failure. This disaster will not be cleared up soon.

  • How does Wells fix the indirect harm it caused?
  • New compensation plan removes cross-selling as a benchmark
  • Possible MD&A enforcement action?
  • Branches received 24 hour notice of internal inspections
  • Bank may eliminate 2016 bonuses for senior staff

12/27/16 – Wall Street Journal – Wells Fargo Is Trying to Fix Its Rogue Account Scandal, One Grueling Case at a Time – Making customers whole will be easy if the customer was only charged a few dollars a month for a while. Still simple to resolve if there were monthly charges and a bunch of overdraft fees because money was taken out of an account unknowingly which resulted in some bounced checks.

What do you do when the unpaid fees on a credit card flowed into negative information on a credit report which resulted in a customer being denied funding for a home loan somewhere else? That’s what happened to one interviewed customer.

Destroying someone’s credit is a tough thing to make right.

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Written by Jim Ulvog

February 13, 2017, 9:14 am at 9:14 am

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A few more updates in the ongoing world-wide banking fiascos

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

A few recent reports: Reason for no criminal prosecution of one too-big-to-fail bank is that it was TBTF, an indictment and a settlement in forex cases, and progress in the money laundering investigations.

Since I use the term a lot, here is a definition of fiasco from Google:

a thing that is a complete failure, especially in a ludicrous or humiliating way. Synonyms: failure, disaster, catastrophe, debacle, shambles, farce, mess, wreck.

Seems to me throwing away $530 million of bank capital because bank staff and leaders wanted to cheat customers meets the definition of fiasco.

7/11 – Francine McKenna at Market Watch – HSBC wasn’t prosecuted because it was ‘too big to fail’: House Committee – A House committee concluded that HSBC wasn’t prosecuted for willful AML violations because it was TBTF. One part of the violations was intentionally leaving out of wire instructions any indication that the funds were related to activity in countries with bans.

Staff recommendations were to pursue a criminal prosecution. Attorney General Eric Holder determined the systemic risk was too high and thus agreed to a deferred prosecution agreement.

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Written by Jim Ulvog

July 28, 2016, 8:17 am at 8:17 am

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News on regulatory oversight; insider trading, livings wills, manipulating interest rates.

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Interesting news from the financial world:

  • How NASDAQ watches for insider trading
  • Why bank regulators not disclosing the criteria for evaluating “living wills” causes more systemic financial risk
  • Enforcement efforts on two interest-rate manipulation fiascos

Here is how you get caught for trading on inside information

6/10 – Francine McKenna at MarketWatch – How NASDAQ watches for insider trading – Deep background on how NASDAQ monitors all the trading in the market for suspicious activity. They have a variety of tools and techniques to identify anomalies and drill down to eventually reach the individual trades.

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Written by Jim Ulvog

June 14, 2016, 7:53 am at 7:53 am

Societe Generale and their trading fiasco is back in the news. Oh, firing someone who lost $5 billion in unauthorized trades is a wrongful termination.

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

I can now add the French judicial system to the reeeeeally long list of things I just do not understand:

6/7 – Wall Street Journal – Court Finds Kerviel, Whose Bets Lost Bank Billions, Was Fired Unfairly – A French court awarded a fired banker US$511,000 for what we would call wrongful termination in the US.

Why was he fired? He merely cost the bank €4.9B back in 2008 after they unwound his unauthorized trades. That is only $5,530,000,000 at today’s exchange rate.

First, some background. You can check out the WSJ article on 10/6/10 for more details: Rogue French Trader Sentenced to 3 Years.

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Written by Jim Ulvog

June 10, 2016, 8:29 am at 8:29 am

Posted in Accounting, Fraud, Pondering

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Ancient finances, Alexander the Great chapter

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Image: Flickr by Carole Raddato

Image: Flickr by Carole Raddato

Image: Flickr by Carole Raddato

The Wall Street Journal has a delightful review by James Romm:  Conqueror and Squanderer. The review is of The Treasures of Alexander the Great: How One Man’s Wealth Shaped the World by Frank Holt.

I have a growing interest in ancient finances. Try thinking about how to run a large operation, such as an empire or an army on campaign when there is no banking system and no means of storing wealth other than controlling territory or possessing gold or silver. There is no way to gain any sort of liquidity. Your ability to buy something is limited to the gold in your hand.

How you pay your army today here in the field or buy supplies for 20,000 troops when your wealth is in the form of tons of gold which is a two-month march behind you?

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Written by Jim Ulvog

April 29, 2016, 9:01 am at 9:01 am

Posted in Economics, Other stuff

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Surprise! Enforcement efforts against money laundering have unintended consequences.

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Image courtesy of DollarPhotoClub.com.

Image courtesy of DollarPhotoClub.com.

Severe fines against large banks for violating anti-money laundering rules has led the banks to place a heavy focus on making sure their customers are legit. The result is a closing accounts of customers who have too high a risk of being shady. The unintended consequence is legitimate businesses and legitimate charities have difficulty finding a place to do their banking.

In a wonderful irony, articles at The Wall Street Journal on two successive days illustrate the tension. The articles leave you wondering in opposite directions. One article makes you think the banks ought to get serious about screening clients and shut down a bunch of accounts. The other article makes you wonder why these charities doing such wonderful work are getting all their accounts closed for no good reason.

First, charities finding themselves without bank accounts.

3/30 – Wall Street Journal – Cautious Banks Hinder Charity Financing / Account shutdowns and holdups of money transfers hinder ability to deliver aid to refugees – A charity that funds a school in Turkey which provides education to around 400 refugees from Syria had their account closed by JP Morgan for no stated reason. After an inquiry from the WSJ, the bank reversed their decision.

Another charity that operates a hospital in Syria had their accounts closed by BofA. After moving to Wells Fargo, their accounts were closed there. Staff at the hospital went four months without pay while the charity tried to figure how to get money into the country.

Authors have spoken to eight other charities who have had their accounts closed. Many others have had money transfers going into Syria, Turkey, or Lebanon held up for varying lengths of time.

Article mentions that banks are under pressure from the U.S. federal government to monitor their customers accounts and close those accounts which could be related to money laundering, whether related to drug running, terrorist financing, or other illegal activity.

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Written by Jim Ulvog

March 31, 2016, 8:24 am at 8:24 am

How’s this for a brazen money laundering scheme? We can add another item to the list of at least $16 billion of fines for money laundering.

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

Check out this plan for evading money laundering rules. Oh, it came with a money back guarantee to clients whose money was being laundered. Also, I’ve accumulated a preliminary list of industry-wide fines for getting caught busting those AML rules.

11/26 – CNN – Barclays fined $109 million for trying to hide “the deal of the century” – Staff at Barclays came up with a creative plan to hide clients’ money. The staff processed US$2.8B of deposits from “politically exposed people”, meaning people with significant political power and ability to do bad stuff to generate personal wealth.

Commission for the bank was £52M (US$77M).

According to the article, this scheme involved merely performing an Internet search to verify the source of funds as asserted by the clients, did not enter clients’ names on the internal computer systems which meant compliance staff would never find out who owned the money, and used quickly opened & closed offshore accounts to move the money.

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Written by Jim Ulvog

November 30, 2015, 8:02 am at 8:02 am

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So it *is* possible to persuade a jury to return a guilty verdict against a banker

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Image courtesy of DollarPhotoClub.com

Image courtesy of DollarPhotoClub.com

When sitting down to read my copy of The Wall Street Journal on Friday, I was surprised to read that a Jury Delivers First U.S. Libor Manipulation Convictions. This is even more intriguing after I mentioned last week that Explaining complex financial details to jurors is an obstacle to putting senior executives in jail and previously asked back in November 2014 So you think tons of bankers should be in jail? Getting a jury to agree seems to be a problem.

In this case, two bankers were indicted for conspiracy and wire fraud for manipulating Libor interest rates while they worked for Rabobank. On November 5 they were convicted by a jury. Therefore we no longer need to use the word allegedly when discussing their manipulation of interest rates.

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Written by Jim Ulvog

November 9, 2015, 7:11 am at 7:11 am

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Commerzbank joins the billion-dollar-fine club

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The newest member of the elite club of banks that write billion dollar checks to settle up with the regulators is Commerzbank AG, the second largest bank in Germany.

After reading several reports on the billion and a half settlement, it seems to me that their corporate culture, at the core personality level, is to be not overly concerned about complying with US law.

The two primary issues are aiding and abetting the billion-dollar Olympus fraud and processing a quarter billion dollars of wire transfers for Iranian and Syrian customers banned from the US banking system.

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Written by Jim Ulvog

March 13, 2015, 10:28 am at 10:28 am

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HSBC helped assorted bad guys hide their money

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Not much new reporting in the last week or so on HSBC. There has been a huge amount of political blowback in Europe, especially England. I’m not going into that turmoil.

Irony alert: last article I’ll mention suggests that money laundering may now be illegal in Switzerland, land of the numbered bank account.

Here is the last of the major Guardian articles:

2/12 – The Guardian – HSBC files: Swiss bank hid money for suspected criminals – Part 5. Depressing read.

Alleged crooks HSBC dealt with: Read the rest of this entry »

Written by Jim Ulvog

February 18, 2015, 8:37 am at 8:37 am

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Talk about pinching your pennies – HSBC had an evasion scheme for customers to avoid paying a 15% withholding tax on interest earned on hidden money.

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Good grief.

Not only are we talking tax felons. We’re talking cheap tax felons.

2/10 – The Guardian – HSBC files: Swiss bank aggressively pushed way for clients to avoid new tax – Part 3. HSBC developed a specialized product they presented to lots of their clients. Lots bought it.

Problem: If you have money hidden in Switzerland, there is a tax treaty that requires the banks to withhold 15% on the interest earnings and turn the withholding over the British treasury. No reporting of individual names or amounts, just one lump sum sent to England. Apparently letting the crown have 15% of your interest is too much for some blokes.

Wrinkle: Read the rest of this entry »

Written by Jim Ulvog

February 12, 2015, 5:00 am at 5:00 am

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More good stuff on the banking fiascos – 2/10/15

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The coverage by The Guardian and ICIJ mentioned in yesterday’s post is kicking off a lot of coverage. Twitter is lighting up with a few hundred tweets in a few minutes, but I’m learning that interest typically fades in a few days. By Friday, the twitterverse will be on to its next outrage.

Here are two more articles I found interesting. First is on UBS maybe having more trouble on aiding tax evasion. Second, when stock analysts say one of the too big to fail banks is too big to manage, it is capitalists making the criticism, not people outside the business world.

2/4 – Wall Street Journal – UBS Faces a New Tax-Evasion Probe – Authorities Investigate Whether Swiss Bank’s Clients Used ‘Bearer Securities’ to Hide Cash

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Written by Jim Ulvog

February 10, 2015, 7:07 am at 7:07 am

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To get $1.5 billion settlement, S&P doesn’t have to admit wrongdoing and Justice Department doesn’t have to admit retaliation. Split the dollar positions and it’s a done deal.

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Oh, and bring in some jelly donuts when the deal is getting close and you can bridge that last third of a billion difference.

S&P reached a settlement with the Department of Justice and a bunch of states over the ratings S&P gave to mortgage securities before the financial crisis. Top line settlement amount is $1.5B. See Wall Street Journal article, S&P to Pay $1.5 Billion to Resolve Crisis-Era Litigation.

Be advised the ridicule and abuse in this post will soon flow thick…

Settlement negotiations

Starting point from the DoJ side was $5B and acknowledgement of wrongdoing.  S&P wanted under a billion and acknowledgment of the whole deal being in retaliation for S&P downgrading the federal credit rating.

My version of the back and forth haggling that got them to common ground:

$5B.

Drop admission of guilt.

DoJ: Okay, $3.2B. S&P: We’ll break the billion mark.

DoJ drop to $1.5B and S&P up to $1.2B.

Bring in those yummy donuts. You know, the ones with the jelly filling and sprinkles. Then drop the retaliation claim and agree on $1.3B.

Done? Yup.

Everyone’s happy. Nobody has to admit they did anything wrong. Both claim complete, total vindication.

That’s my loose paraphrase. For the unabridged version, see the WSJ article How the Justice Department, S&P Came to Terms.

A different look at the sequencing

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Written by Jim Ulvog

February 6, 2015, 7:58 am at 7:58 am

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My first baby steps to understand dark pools and high frequency trading

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I’m blogging to learn. Writing means you need to understand, which means you need to read and think, which means you learn and then you can write.

One item on a really long list of things I don’t get is dark pools and high-speed trading. I understand the basic concept, but know there is a lot I’m missing. If you don’t get it either, join me for a few steps in the journey to get a clue.

Here’s an article that tells me there is a problem: Read the rest of this entry »

Written by Jim Ulvog

January 22, 2015, 8:40 am at 8:40 am

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