September 30, 2021. Fraudulent manipulation of foreign financial transactions is not a magic trick. The United States Department of Justice simultaneously filed and settled a case against a major bank regarding deceptive practices resulting in higher fees for foreign transactions (FX). Under the terms of the settlement, Wells Fargo Bank, N.A. paid $72.6 million. A whistleblower brought this matter to the Government’s attention by filing a confidential declaration with the U.S. Department of Justice pursuant to the Financial Institutions Anti-Fraud Enforcement Act (FIRREA). About half of the settlement will be paid to affected customers as restitution and the remaining half will be paid to the government as civil penalties and asset forfeiture.
According to the allegations, the bank’s FX sales specialists defrauded almost 800 commercial customers, including small and medium-sized businesses and federally insured financial institutions, through several deceptive practices. Foreign transaction services entail “converting the customers US dollars into foreign currency for outgoing wire transfers and converting incoming wire transfers of foreign currency into U.S. dollars.”
Between 2010-2017, FX sales specialists systematically gave incorrect pricing information contrary to pricing agreements and marked up currency in order to increase their “spread” or “sales margin.” Tactics bank employees utilized to increase sales margins included incorrectly transposing numbers in exchange rates and even providing inaccurate or false information about exchange rates. FX Sales Specialists targeted some customer representatives as easy marks, “thought to be less sophisticated or experienced in FX trading,” and charged those customers more for their transactions. In a practice referred to as the “BSwift Piñata,” as Wells Fargo did not generally disclose when customers received incoming wires, sales specialists could pick and choose to conduct transactions at a time of day and market rate which was most favorable to the bank (and least advantageous to the customer).
The bank encouraged these practices through financially incentivizing its employees’ performance based solely on sales revenue. The bank also lacked meaningful policies to track or audit FX transactions to determine if sales specialists were deviating from fixed-price agreements.
Fraudulent manipulation of foreign currency exchange rates erodes consumer trust in banking institutions and is a disincentive to do business with foreign entities. Whistleblowers are needed to prevent these harmful practices from becoming a norm, as this case shows how systematic deceptive practices became standard operating procedure for a company. The whistleblower received $1.6 million, the maximum award for a whistleblower in a successful FIRREA case.
If you would like to report banking fraud, you can contact attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva was the Senior Counsel for Health Care Fraud. Eva and Renee now represent whistleblowers. For a free consultation, you can contact Renée at [email protected] (tel.: 202-417-3664) or contact Eva Gunasekera at [email protected]. You can also go to Tycko & Zavareei LLP’s website for whistleblowers to learn more at https://www.fraudfighters.net/.