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Compliance Into the Weeds

Compliance into the Weeds: Bank of America’s $1.2B AML Breakdown: Too Big to Remediate?

The award-winning Compliance into the Weeds is the only weekly podcast that dives deep into compliance-related topics, going into the weeds to uncover hard-hitting compliance insights. Look no further than Compliance into the Weeds! In this episode of Compliance into the Weeds, Tom Fox and Matt Kelly discuss the recent OCC and Federal Reserve enforcement actions against BAO for $1.2bn.

The enforcement action against Bank of America (with OCC, FinCEN, OFAC, and others) was for BOA’s failure to maintain an effective Bank Secrecy Act/AML program, including flawed transaction monitoring that led to inadequate suspicious activity reporting, weak customer due diligence, and deficient sanctions screening, sometimes with law enforcement flagging issues to the bank rather than the reverse.

They place this alongside recent actions against UBS, American Express, and a New York DFS fine of SEB, arguing recurring failures stem from poor transaction analysis. Kelly ties Bank of America’s problems to its homegrown “Event Processor” system, launched in 2010, which critics say uses arbitrary risk-scoring thresholds and lacks recalibration, compounded by insufficient staffing and management support. They highlight governance and accountability concerns, including unresolved findings from a 2024 OCC order, questions about board oversight of compliance, and doubts that fines alone will drive lasting remediation.

Key highlights:

  • BofA Fine Breakdown
  • What Went Wrong in AML
  • How the Tech Failed
  • Leadership and Culture Accountability
  • Fixing It People and Oversight
  • Risk Assessments and Too Big to Remediate

Resources:

Matt in Radical Compliance

Tom in the FCPA Compliance Report

Tom

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A multi-award-winning podcast, Compliance into the Weeds was most recently honored as one of the Top 25 Regulatory Compliance Podcasts, the Top 10 Business Law Podcasts, and the Top 12 Risk Management Podcasts. Compliance into the Weeds has been awarded a Davey, Communicator, and W3 Award, all for podcast excellence.

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Compliance Into the Weeds

Compliance into the Weeds: Amex AML Enforcement: Credit Card Risk, SAR Failures, and Board Accountability

The award-winning Compliance into the Weeds is the only weekly podcast that takes a deep dive into compliance topics, literally going into the weeds. Looking for hard-hitting compliance insights? Look no further than Compliance into the Weeds! In this episode of Compliance into the Weeds, Tom Fox and Matt Kelly discuss the recent OCC and Federal Reserve enforcement actions against American Express.

The penalties included a $350 million civil penalty, cease-and-desist orders, and extensive compliance obligations tied to weaknesses in customer due diligence, suspicious activity reporting, staffing, and risk assessment. Tom highlighted that Amex processed billions of transactions, many ordinary credit-card transactions, showing banks must know all customers, not just high-dollar activity, and noted regulators’ broader pattern of similar actions across the industry as financial innovation outpaced compliance investment.

Matt noted that regulators depend on SARs as critical inputs for broader enforcement “mosaics,” explaining why SAR failures draw intense scrutiny. The orders’ notable feature is direct board involvement, requiring a board-level compliance committee and action plan to hold management accountable, with a strong focus on end-to-end documentation and evidence trails; they see no facts suggesting the egregious, employee-involved criminality seen in TD Bank.

Key highlights:

  • Industry Pattern and Root Causes
  • Innovation as Compliance Risk
  • Board Oversight Mandates
  • Why SARs Matter
  • DOJ Risk and TD Bank Comparison
  • Disjointed Compliance and Fixes

Resources:

Tom in the FCPA Compliance Report, Part 1 and Part 2

Tom

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A multi-award-winning podcast, Compliance into the Weeds, was recently named one of the Top 25 Regulatory Compliance Podcasts, Top 10 Business Law Podcasts, and Top 12 Risk Management Podcasts. Compliance into the Weeds has been awarded a Davey, Communicator, and W3 Award, all for podcast excellence.

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Blog

AMEX’s $350 Million AML Penalty: Part 2 – Lessons for CCOs and Boards

Paying a penalty and demonstrating an effective compliance program are different tasks. The AMEX enforcement actions make that distinction concrete.

In Part 1, we examined the OCC’s $350 million civil money penalty and findings concerning risk assessment, customer information, suspicious activity reporting, resources, training, and independent testing. The Federal Reserve’s Order focuses on enterprise-level change. Its starting point is board oversight.

For compliance professionals across industries, that is the opportunity: use the remediation requirements to challenge your own governance and controls. The orders bind the named entities. The broader applications below are recommendations, not claims that banking-specific obligations apply to every company.

Board oversight must produce accountable decisions

Within 90 days of the order’s effective date, AMEX’s board must submit a written oversight plan to the Federal Reserve. The plan must explain how directors will hold senior management accountable for remediation, ensure adequate resources, oversee an effective enterprise-wide BSA/AML compliance risk management program, and secure effective reporting and escalation. The board’s responsibilities expressly encompass remediation under both the Federal Reserve order and the OCC order.

Notice the allocation of responsibility. The board oversees. Senior management executes. Neither role should disappear into an instruction that “compliance will handle it.” For another company applying this lesson, I recommend that each material remediation item identify an accountable executive, responsible business owner, required resources, completion criteria, and independent reviewer. The CCO should help coordinate and challenge the work without becoming the default owner of every operational control.

COSO’s Internal Control–Integrated Framework provides a corresponding board-oversight benchmark. Under Principle 2, directors should independently oversee internal control development and performance. Translate that principle into board practice. Record the questions directors asked, the evidence management provided, resource decisions, and the follow-up required. A presentation should support an oversight decision, not substitute for one.

Make enterprise-wide compliance operational

The Federal Reserve requires AMEX to submit an acceptable plan within 90 days to improve enterprise-wide BSA/AML compliance risk management. Required content includes business-line and legal-entity policies, customer due diligence, cross-business-line suspicious activity reporting, and transaction-monitoring methodologies. Establish, analyze, test, and document monitoring rules and thresholds, paying attention to factors such as customer, product, or service, and geography.

That requirement suggests a practical exercise for any CCO: select a significant risk and trace how the organization treats it. Who collects the relevant information? Who assesses it? What triggers review? Which team investigates? When does senior management receive the issue? What reaches the board? But do not stop at the organization chart. The order calls for risk-based oversight of BSA/AML systems and the use of information from network partnerships, ATM partners, and third parties supporting compliance.

For a nonfinancial company, a comparable review could follow a high-risk distributor relationship from onboarding through orders, payments, exceptions, and termination. Test the handoffs, including information held by outside providers. The Federal Reserve also requires the travel-related services subsidiary to submit an acceptable Office of Foreign Assets Control (OFAC) compliance plan within 90 days. It must address risk assessment, ongoing job-appropriate training, and enhanced policies and screening procedures. This is a distinct sanctions-compliance remediation requirement; it should not be recast as a finding of a particular prohibited transaction.

Use COSO to examine the connections between controls

COSO organizes internal control around five components: control environment, risk assessment, control activities, information and communication, and monitoring activities. The framework emphasizes that these components must work together, not exist as separate administrative exercises. Applied to the AMEX findings, I recommend testing a connected chain of evidence.

Begin with the commercial activity and its risk assessment. Identify the resulting control, the person responsible, the information required, the escalation decision, and the independent test. Then examine what happens when one element fails. For example, don’t accept a customer-risk rating as useful just because a system has a completed field. Ask whether supporting information is reliable, whether the rating changes monitoring, and whether testing confirms that the resulting controls address the assessed risk.

COSO’s Principles 16 and 17 reinforce evaluating controls and promptly communicating deficiencies to those responsible for correction, including senior management and directors where appropriate. The practical point is to test relationships between controls, not merely their individual existence. Otherwise, management may demonstrate that every department completed its task without demonstrating that the overall risk was addressed.

Resource commitments need an operational explanation

The Federal Reserve requires the board to ensure senior management has adequate resources for required remediation. Make that discussion more useful than a comparison of this year’s compliance budget with last year’s. You should perform a capacity assessment for each critical control. Identify the workload, expertise, systems, quality-review capacity, and unresolved dependencies. Where management proposes automation, require evidence that the tool handles the relevant risk and that someone owns exceptions.

The DOJ’s 2024 ECCP provides a useful cross-check: evaluate program design, resources and authority, and effectiveness in practice. Its resource analysis should also examine personnel qualifications and compliance’s access to the board.

A board paper should therefore explain what a resource request will accomplish and what risk remains without it. Ask management to identify work that cannot be completed to the required standard, rather than presenting an unexplained staffing total.

Accountability must survive changes in personnel

Paragraph 4 of the Federal Reserve order deserves careful attention. Based on the firm’s investigative record compiled from 2024 to the order’s issuance, it prohibits the firm from directly or indirectly retaining individuals who meet all three specified conditions: participation in the underlying misconduct, formal disciplinary action connected to it, and separation or legal termination connected to that misconduct. The restriction covers retention as an officer, employee, agent, consultant, or contractor within the firm or its subsidiaries or affiliates.

This is not a blanket prohibition covering everyone who was investigated. The conditions are cumulative. The order also requires continued cooperation and substantial assistance with Federal Reserve investigations of parties affiliated with the involved institution.

For other CCOs, the lesson is to connect substantiated investigation outcomes with hiring, contracting, and vendor controls. Subject to applicable employment and privacy requirements, test whether a person excluded through one channel could return through another. Require documented review rather than allowing a change in job title or engagement structure to bypass accountability.

Remediation requires evidence, not just a timetable

The Federal Reserve requires implementation timelines with specific component deadlines. Approved plans must be adopted within ten days of approval and then promptly implemented. Amendments or rescissions require prior approval from the Reserve Bank. Board or authorized committee progress reports are due within 45 days after the end of the first full calendar quarter following the order and each quarter thereafter, addressing actions, schedules, and results. The 90-day submissions are plan deadlines, not requirements to complete every remediation measure within 90 days. For your program, distinguish a completed task from a corrected risk. A revised procedure is a deliverable. Evidence that employees apply it correctly is a different milestone.

The ECCP similarly examines root-cause analysis, control testing, lessons learned, and whether improvements can prevent or detect similar misconduct. The ECCP asks, “What methodology has the company used to identify, analyze, and address the particular risks it faces? What features of the company reduce its exposure to such risks? Is the company’s approach to risk management proactive or reactive? What information has the company identified and collected to help detect the type of misconduct in question? How has that information informed the company’s compliance program?” Use those questions to challenge proposed closure evidence.

The bottom line is that you must demonstrate implementation and an appropriately independent reviewer to evaluate operating effectiveness. Define the testing period, evidence, and acceptable results before the item is marked complete.

CCO actions and board questions

  • For the CCO: build one end-to-end evidence trail. Select a material risk and connect the assessment, controls, information, decisions, escalation, testing, and corrective action. Identify exactly where evidence is missing.
  • For the board: challenge ownership and capability. Which executive owns the unresolved risk? What resources are missing? What decision does management need from directors now?
  • For both: define success before declaring completion. What independent evidence supports closure? Have the underlying causes been addressed? What would alert us that the problem has returned?

Summary

The bottom line is that a compliance program must reflect the business’s actual risks and demonstrate that its controls work. The OCC’s central finding was a mismatch between the bank’s risk assessment and its operations: the assessment emphasized relatively narrow deposit activities while inadequately addressing dominant credit and charge card products. Weak customer identification, due diligence, suspicious activity reporting, independent testing, staffing, and job-specific training compounded that failure.

AMEX processed about $13 billion in suspected trade-based money laundering activity between June 2014 and May 2025 without timely identifying and reporting its full scope. It carefully distinguishes those findings from a conclusion that AMEX itself laundered that amount. The broader lesson is that completing assessments, filing reports, and delivering training do not, by themselves, establish program effectiveness.

We next considered the shift from compliance failures to governance and remediation, emphasizing that directors must oversee the work while senior management remains accountable for execution. Remediation should have identifiable executive and business owners, adequate resources, clear completion criteria, and independent review, rather than becoming an undefined assignment for the compliance department.

Drawing on COSO’s Internal Control Framework and the DOJ’s Evaluation of Corporate Compliance Programs, we reviewed how risk assessments, controls, information, escalation, and monitoring work together, and whether personnel and systems can perform the required work. The practical message for CCOs and boards is to distinguish a completed task from a corrected risk: a revised procedure is not proof of effective remediation. Leaders should require evidence that underlying causes have been addressed, controls operate effectively, and recurring problems will be detected. Risk alignment, accountability, and demonstrated effectiveness must become part of how the business is governed.

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AMEX’s $350 Million AML Penalty: Part 1 – What Went Wrong

A compliance risk assessment should describe the business the company actually conducts. What happens when it does not?

The AMEX enforcement actions provide a consequential answer. On October 8, 2026, the Office of the Comptroller of the Currency (OCC) announced a $350 million civil monetary penalty (OCC Penalty) and a cease-and-desist order(OCC Order) against American Express Company and American Express Travel Related Services Company, Inc. (collectively, AMEX) for Bank Secrecy Act and anti-money laundering deficiencies. The Federal Reserve separately issued a cease-and-desist order (FED Order) against AMEX. The OCC Press Release noted that the monetary penalty was imposed by the OCC, not both agencies.

For Chief Compliance Officers, directors, counsel, and internal auditors, the central lesson extends beyond banking: a compliance program must reflect the business’s actual risks, and oversight must demand evidence that it works. Over the next couple of blog posts, we will explore the Orders and Penalties. Today, we’ll start with what went wrong at AMEX.

What the enforcement record establishes

The OCC found violations involving the BSA/AML program, suspicious activity reporting, customer due diligence, and customer identification. According to the OCC Order, from approximately June 2014 through May 2025, the bank processed approximately $13 billion in suspected trade-based money laundering activity. That figure includes suspicious card charges and associated repayments. In some cases, the activity passed through accounts linked to bank insiders. The bank periodically reported suspicious activity but lacked the controls and monitoring capabilities to identify and report its full scope promptly.

Precision matters. The $13 billion figure does not mean AMEX laundered that amount, nor should it be described as $13 billion in distinct criminal proceeds. The findings concern suspected activity and failures in detection, evaluation, and reporting. The reference to insider-associated accounts also does not establish that every associated individual knowingly participated in misconduct.

The risk assessment did not match the business

The OCC’s most instructive finding concerns the program’s starting point. The bank’s risk assessment focused on its relatively narrow demand deposit products and services while giving insufficient attention to its more dominant credit and charge card products. This was a mismatch between the business being conducted and the risks being assessed.

For a CCO, the question should be immediate: does our assessment accurately represent how our company generates revenue, moves money, serves customers, and uses intermediaries?

The DOJ’s 2024 Evaluation of Corporate Compliance Programs (ECCP) begins its risk-assessment analysis by understanding the company’s business and examining how compliance scrutiny and resources address its risks. The ECCP asks “how the company has identified, assessed, and defined its risk profile, including specific factors that mitigate the company’s risk, and the degree to which the program devotes appropriate scrutiny and resources to the remaining spectrum of risks.” That provides a useful comparison here, not an additional finding against AMEX or the legal basis for these orders.

Consider a hypothetical manufacturer that rigorously reviews employee expenses but inadequately evaluates high-risk distributor payments. The expense controls may function exactly as designed. They still do not answer the more consequential risk question. The lesson is that the largest business line does not always present the greatest compliance risk. Management should demonstrate a defensible relationship between business activities, assessed risks, and control coverage. Completing an assessment is not the same as assessing the right business.

Customer information failures undermined monitoring

The OCC identified weaknesses in two distinct functions. Customer identification procedures did not adequately support a reasonable belief that the bank knew each customer’s true identity. Ongoing customer due diligence did not effectively establish the nature and purpose of customer relationships, undermining risk ratings and monitoring. Read together, these findings describe more than incomplete onboarding files. They connect customer knowledge to the ability to recognize transactions that warrant further investigation.

For businesses outside banking, the useful analogy is the difference between collecting a distributor’s documents and understanding what the distributor actually does. Who is involved? What commercial purpose does the relationship serve? What activity would fall outside that purpose?

The OCC also found systemic breakdowns in suspicious activity monitoring, investigation, and reporting, resulting in late, missed, or incomplete suspicious activity reports (SARs). Those failures extended beyond suspected trade-based money laundering to other suspicious activity. Importantly, the bank did file some reports. The OCC criticized the bank for failing to promptly identify and report the full scope of the activity.

That distinction should change how a compliance committee evaluates performance. Ask what the reporting process covered, what it missed, and how those conclusions were tested. A report count alone does not establish the answer. The same challenge should be applied to investigation totals, due diligence completions, and training statistics.

Audit, resources, and training did not provide effective safeguards

The OCC found that the internal audit did not effectively monitor BSA/AML compliance. Independent testing was neither appropriately scoped nor effective relative to the bank’s risk profile, contributing to delayed detection and remediation of deficiencies. The key takeaway is that an audit plan should challenge the compliance program’s assumptions, not simply confirm that documented procedures were followed. Testing a process against an incomplete view of risk can leave the underlying problem untouched.

The findings also addressed staffing and capability. Historically, the bank has not supported its BSA/AML program with appropriate resources, including personnel with the necessary skills, expertise, and training. Employee training did not adequately address job-specific responsibilities, impairing identification, escalation, and reporting of risks and suspicious activity.

For compliance leadership, those findings support a practical distinction: headcount, competence, and operational capacity should be assessed separately. Hiring more people should not substitute for determining which expertise a control requires.

Likewise, training should be evaluated against decisions employees must make. Can an investigator recognize a relevant pattern? Can an account manager identify a concern and route it correctly? Can a director challenge an explanation of control effectiveness? These are better questions to bring to the next program review than whether everyone completed the assigned course.

The Federal Reserve extended the concern to the enterprise

The FED Order identified significant deficiencies in the enterprise-wide financial crimes risk management program, including transaction monitoring, fraud referral processes, third-party risk assessment, and financial crimes risk management. Its order directs the AMEX board to address management accountability, remediation resources, program effectiveness, and reporting and escalation.

The broader governance lesson is not that the compliance department alone must work harder. Management responsibilities and board information should be examined alongside the technical controls. A remediation plan should identify who must act, what resources are required, and how directors will know whether the action worked.

AMEX’s public response

In its October 8 public statement, AMEX said internal and external reviews identified areas for improvement. It described investments in people, technology, training, governance, and oversight, as well as cooperation with regulators and law enforcement. Chairman and Chief Executive Officer Stephen J. Squeri stated, “While we have made meaningful progress, we know there is more work to do.”

The company also said the penalty would not affect full-year 2026 guidance, that the orders imposed no asset cap, and that anticipated remediation costs would not affect 2027 guidance. These are company statements, including forward-looking expectations, not regulatory findings about remediation effectiveness. The Federal Reserve separately acknowledged cooperation and remedial actions already undertaken. Progress deserves recognition, but corrective work should not be confused with demonstrated completion.

Three practical takeaways

  1. Start with business reality. Compare the risk assessment with actual products, transaction flows, customer relationships, and third-party arrangements. Require explanations for significant gaps in coverage.
  2. Challenge evidence of effectiveness. Ask the internal audit to test whether controls identify the risks that matter, not merely whether staff follow procedures. Examine decision quality and timeliness alongside activity counts.
  3. Make capability a governance discussion. Bring the board a clear account of required expertise, unresolved resource constraints, and the risks those constraints leave exposed.

The question for the next board meeting is straightforward: What evidence demonstrates that our compliance program addresses the business we actually operate?

Join us tomorrow, in Part 2, as we examine how the Federal Reserve’s remediation requirements can help CCOs and directors turn that question into accountable action.

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Compliance Into the Weeds

Compliance into the Weeds: Banking Regulators Cut Model Risk Guidance: Implications for Compliance, Audit, and AML Oversight

The award-winning Compliance into the Weeds is the only weekly podcast that takes a deep dive into a compliance-related topic, literally going into the weeds to explore it more fully, and looking for some hard-hitting insights on compliance. Look no further than Compliance into the Weeds! In this episode of Compliance into the Weeds, Tom Fox and Matt Kelly discuss new Federal Reserve, FDIC, and OCC model risk management guidance issued late Friday, arguing it replaces detailed, bright-line expectations with thin, principles-based language.

They contrast the prior OCC guidance (109 pages) with the new 12-page document, saying it describes model risk governance abstractly but offers little direction on what banks should do, leaving decisions about materiality and oversight to management. They highlight practical consequences for bank compliance and internal audit, including reduced leverage to insist on prudent governance, potential weakening of AML model oversight under the strict-liability Bank Secrecy Act, and the risk of more arbitrary enforcement amid reduced regulatory staffing. They also note that the guidance excludes AI models, with future AI guidance promised only through a later comment process.

Key highlights:

  • From 109 pages to 12
  • Principles vs specifics debate
  • Internal audit sidelined
  • Regulators and capacity cuts
  • AI models left out 

Resources:

Matt on Radical Compliance

 Tom

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A multi-award-winning podcast, Compliance into the Weeds was most recently honored as one of the Top 25 Regulatory Compliance Podcasts, a Top 10 Business Law Podcast, and a Top 12 Risk Management Podcast. Compliance into the Weeds has been conferred a Davey, a Communicator Award, and a W3 Award, all for podcast excellence.

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Blog

Wells Fargo, Risk Management and Reputational Recovery – Part 1: The Penalty

On June 3, 2025, the Federal Reserve lifted its unprecedented $2 trillion asset cap on Wells Fargo, marking the symbolic end to one of the most consequential compliance enforcement actions in modern U.S. banking history. For the compliance and risk management community, this moment is not a victory lap—it is a case study of how compliance failures cascade, reputational risk becomes operationally tangible, and regulatory patience has its limits.

Over the next two blog posts, I want to explore what happened, why it mattered, and what lessons every compliance professional should carry forward. These blog posts are based on two primary articles. The First Wells Fargo Is Allowed to Grow Again After 7 Years Under Asset-Cap Penalty, by Gina Heeb in the Wall Street Journal. The second is “Wells Fargo Asset Cap Lifted by Fed, Paving Way for Growth” by Yizhu Wang in Bloomberg. The final is an op-ed piece in Bloomberg, entitled “Wells Fargo’s Asset Cap Has Been a Good Punishment,” by Paul Davies.

The Scandal That Shook the System

The Wells Fargo saga began with a simple, albeit stunning, revelation: employees had opened millions of unauthorized deposit and credit card accounts to meet aggressive internal sales goals. Between 2009 and 2016, over 3.5 million accounts were opened without the customer’s consent. Many of these accounts generated fees, tarnishing customer relationships and shaking public trust in one of the most storied names in American banking.

As the crisis deepened, it was not just a case of bad apples. It was a system-wide failure of controls, risk oversight, and a corporate culture that incentivized misconduct. The sales quotas that fueled the behavior were directly tied to compensation and job security, creating a high-pressure environment where fraud became a means of survival.

Regulators acted swiftly. In 2016, Wells Fargo was fined $185 million. In 2018, the Federal Reserve took the rare and dramatic step of capping the bank’s total assets at approximately $2 trillion, essentially freezing its ability to grow until it could demonstrate a wholesale overhaul of its risk management and governance practices.

The Asset Cap: Punishment with Purpose

We need to be clear: this was not just a penalty. It was a structural constraint that directly impacted Wells Fargo’s ability to operate and compete in its core business. The $2 trillion asset cap imposed by the Federal Reserve in 2018 did not simply send a signal; it built a wall. It limited Wells Fargo’s ability to grow its balance sheet, take on new deposits, issue new loans, and expand into revenue-generating business lines, such as investment banking, trading, and wealth management. Unlike traditional enforcement actions, which often result in fines or deferred prosecution agreements, the asset cap attacked the bank’s future potential, not just its past misdeeds.

In short, it was a period of growth stagnation. For a publicly traded institution that relies on growth to attract investors, increase shareholder value, and maintain market position, such a freeze is devastating.

The restriction forced the bank into a defensive crouch. Instead of competing for market share or innovating with new financial products, Wells Fargo was compelled to pour resources into compliance remediation and cultural rehabilitation. According to public filings and internal estimates, the bank spent more than $2.5 billion above its 2018 baseline to maintain the risk, control, and compliance infrastructure needed to satisfy dozens of consent orders. This included the hiring of more than 10,000 employees dedicated to risk and regulatory functions—a remarkable mobilization of resources that most firms would struggle to afford.

As Davies aptly observed, “The asset cap has become a feared punishment for banks in the U.S.; they will want to avoid it at all costs.” And banks should. Because it not only restricts current operations, it sends a clear signal to markets, analysts, and regulators: this institution is not yet trusted to grow.

However, here’s the twist: in the case of Wells Fargo, it did work.

The asset cap’s forced pause compelled the bank to undertake a comprehensive review of its governance and culture. Under the leadership of CEO Charlie Scharf, who joined BNY Mellon in 2019 and previously held senior roles at Visa and JPMorgan, Wells Fargo began the arduous but necessary work of rebuilding. Scharf wasted no time restructuring the risk and compliance functions, streamlining reporting lines, and replacing much of the leadership team that had presided over the bank’s previous failures. Perhaps most importantly, he made compliance the focal point of executive decision-making, beginning every operating committee meeting with a thorough review of regulatory progress.

In effect, the asset cap did not simply punish Wells Fargo; it saved the bank from itself. It forced the kind of systemic, sustainable change that no fine or press release could have achieved. Wells Fargo emerged leaner, more disciplined, and more compliant. In many ways, it became a model for what the Federal Reserve, the Department of Justice (DOJ), and numerous other regulatory agencies now expect. Not simply accountability but a demonstrable and lasting commitment to cultural transformation.

This is remediation before reward. It is tone at the top in action. And for compliance professionals everywhere, it is proof that when structural enforcement is coupled with leadership willing to change, reform is not only possible but, as Theranos might say, “inevitable.”

Why It Worked: Enforcement as a Governance Driver

For corporate compliance professionals, Wells Fargo is more than a cautionary tale. It is proof that regulatory enforcement, when aligned with structural consequences, can drive actual change. The asset cap was not a mere symbolic gesture. It constrained Wells Fargo’s operations at its core, limiting everything from loan issuance to deposit intake to investment banking expansion.

Even more significantly, it reshaped how the bank’s board and senior executives prioritized compliance. For years, every operating committee meeting began with updates on regulatory matters. This became the bank’s daily bread.

The message is clear: when enforcement bites into business, executives listen.

Join us tomorrow as we delve into Part 2, where we examine lessons learned for the compliance professional.

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Everything Compliance - Shout Outs and Rants

Shout Outs and Rants: Episode 155, To Tesla and Beyond

Welcome to this edition of Everything Compliance, Shout-Outs, and Rants. In this episode, we have the quintet of Matt Kelly, Jonathan Armstrong, Jonathan Marks, and Special Guest Panelist Hemma Lomax, all hosted by Tom Fox.

  1. Hemma Lomax shouts out to AI for podcasters.
  2. Matt Kelly both shouts out and rants about Marjorie Taylor Greene and her reading list.
  3. Jonathan Marks highlights the quiet compliance professionals who do the day-to-day work of compliance.
  4. Jonathan Armstrong delves into the finances of Tesla, examining its profitability. He shouts out to Operation Spider’s Web.
  5. Tom Fox highlights Wells Fargo’s compliance remediation, the Fed’s asset cap placed on Wells Fargo, and its subsequent removal.

The members of Everything Compliance are:

Tom Fox, the Voice of Compliance, is the host, producer, and sometimes panelist of Everything Compliance. He can be reached at tfox@tfoxlaw.com. The award-winning Everything Compliance is part of the Compliance Podcast Network.

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Compliance Tip of the Day

Compliance Tip of the Day: TD Bank Lessons Learned – The Penalty of Growth Restrictions

Welcome to “Compliance Tip of the Day,” the podcast where we bring you daily insights and practical advice on navigating the ever-evolving landscape of compliance and regulatory requirements.

Whether you’re a seasoned compliance professional or just starting your journey, our aim is to provide you with bite-sized, actionable tips to help you stay on top of your compliance game.

Join us as we explore the latest industry trends, share best practices, and demystify complex compliance issues to keep your organization on the right side of the law.

Tune in daily for your dose of compliance wisdom, and let’s make compliance a little less daunting, one tip at a time.

The OCC not only put on a growth restriction on TD Bank but will further increase the penalty if the Bank fails to meet compliance obligations.

 

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TD Bank: Part 5 – The Reckoning

Today, I want to review the OCC Consent Order to see the bank’s requirements. This is separate from the DOJ requirements under the Bank’s Plea Agreement(s) and the FinCEN Consent. Further, the DOJ and OCC have mandated separate monitors under their attendant settlement agreements. FinCEN’s Order imposes a four-year independent monitorship, and the DOJ Plea Agreement a 3-year Monitorship. As Matt Kelly noted in Radical Compliance, the remediation steps include:

  • Establishing a dedicated compliance committee at the board level;
  • Drafting a plan within 120 days to overhaul its AML compliance program;
  • Hiring an independent compliance consultant within 60 days to conduct their review of TD’s compliance program;
  • Hiring a senior-level AML compliance officer;
  • Staffing up a more robust AML compliance function; and
  • Implementing new policies, procedures, training, and all the other usual requirements we’ve seen from similar banking settlements.

In this blog post, we will consider some of the highlights above and beyond these remediation steps that the Bank must perform.

The Action Plan

The enforcement order mandates that within 120 days, TDBNA must submit a comprehensive BSA/AML Action Plan to the Examiner-in-Charge for approval. This plan must address the bank’s deficiencies in adhering to the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations. The action plan must include detailed corrective actions, reasonable timelines for implementation, and clear accountability for executing these measures. The board of directors is responsible for overseeing the implementation, ensuring adherence, and monitoring progress, with formal reviews required at least annually.

The Action Plan must be subject to continuous updates and modifications as necessary, particularly if directed by the Examiner-in-Charge or if the bank identifies further areas of improvement. The Examiner-in-Charge must approve any significant deviations or material changes to the plan. TDBNA must also submit quarterly progress reports detailing corrective actions, outstanding issues, and timelines for resolving compliance deficiencies, ensuring transparency in the bank’s efforts to remediate its AML program.

In the event of ongoing issues or independent assessments highlighting further weaknesses, the bank must provide written documentation to the Examiner-in-Charge. The board’s review and response to these assessments will drive accountability and ensure the continuous improvement of TDBNA’s BSA/AML compliance program.

AML Program Assessment and Remediation

TDBNA’s response to its enforcement action underlines the critical role of independent third-party assessments in fortifying a bank’s BSA/AML program. The bank must engage an independent consultant, approved by the OCC, to conduct an exhaustive end-to-end review of its entire BSA/AML framework. This process begins within 60 days of the enforcement order, where TDBNA must submit the proposed consultant’s qualifications, along with a detailed scope of work and timeline, for the OCC’s review. The consultant’s expertise in BSA/AML compliance is a key requirement to ensure the assessment is thorough and capable of addressing the bank’s regulatory obligations.

The independent consultant’s primary objective is to assess the bank’s BSA/AML program against its risk profile, identifying any gaps or weaknesses in its structure and operations. This review will examine whether the bank’s transaction monitoring, suspicious activity reporting, and overall governance are robust enough to meet the demands of U.S. regulatory requirements and the bank’s evolving risk landscape. The consultant’s findings will be critical in determining how effectively TDBNA’s AML framework functions and where improvements are necessary.

Upon completing the review, the consultant will deliver a comprehensive report to TDBNA’s board of directors detailing any deficiencies in the bank’s BSA/AML program. The report will also include recommendations for remediation, ensuring the bank addresses areas of concern in a structured and strategic manner. To ensure transparency and accountability, the board will document its review of the report in official meeting minutes, which must be submitted to the OCC. Additionally, the independent consultant will provide a copy of the report directly to the Examiner-in-Charge, ensuring that regulators have a clear view of the findings and the bank’s planned corrective actions.

Beyond simply identifying deficiencies, the bank must ensure it takes prompt and effective action to remediate the issues raised by the independent consultant. TDBNA must incorporate the necessary remediation efforts into its existing BSA/AML Action Plan, ensuring that all gaps are addressed promptly and comprehensively. This integration is crucial, as failure to properly implement corrective measures could lead to further regulatory actions and potentially severe penalties. The OCC will continue to monitor the bank’s progress by submitting updated action plans and progress reports.

Ultimately, this process highlights the importance of maintaining a dynamic and adaptable BSA/AML program that can respond to emerging risks and regulatory expectations. TDBNA’s engagement with an independent consultant reminds all financial institutions that complacency in AML compliance is not an option. By continually assessing and improving their compliance frameworks, banks can better mitigate risk, avoid regulatory scrutiny, and ensure their AML programs remain strong, effective, and compliant with the law.

Three is Not Always a Crowd

Are you beginning to see a pattern here? The Bank engaged third-party consultants who identified significant weaknesses in its AML program and reported these issues to the Bank’s AML leadership. In 2018, one consultant noted that increasing regulatory requirements and transaction volumes would pressure AML operations, making it difficult to meet demands and deadlines. Additionally, the consultant found that The Bank’s testing of its transaction monitoring scenarios took less than the industry average, highlighting inefficiencies in its ability to assess and capture suspicious activity.

In 2019, another consultant flagged sub-optimal transaction monitoring scenarios based on outdated parameters. These outdated scenarios generated many alerts, overwhelming the AML team and limiting their ability to focus on truly high-risk customers and transactions. This finding pointed to a broader issue in the bank’s ability to adapt its monitoring systems to changing regulatory and risk environments, significantly undermining the effectiveness of its AML compliance efforts.

In 2021, a third consultant identified additional limitations within the Bank’s transaction monitoring program, particularly its technology infrastructure. The consultant found that the bank faced technological barriers that restricted its ability to develop new scenarios or adjust existing parameters, further hampering its AML efforts. These ongoing challenges reflect a broader need for the Bank to modernize its systems and ensure its AML program is agile enough to meet regulatory expectations and address emerging risks effectively.

Restriction on Growth

The Consent Order also required the Bank to maintain its total consolidated assets at or below the level reported on September 30, 2024. This mandate prevents the banks from increasing their average total consolidated assets beyond this threshold until they achieve compliance with all actionable articles of the order. The total consolidated assets will be measured using the banks’ respective Consolidated Reports of Condition and Income.

The asset restrictions will remain in place until the banks meet all compliance obligations outlined in the order. However, the Deputy Comptroller can temporarily suspend the asset cap in unusual circumstances. If the banks fail to meet compliance deadlines, the Deputy Comptroller may require a reduction of up to 7% of their total consolidated assets, as reported in the most recent calendar quarter.

If the Bank is notified that a reduction is necessary, it must submit a plan within 30 days for the Comptroller’s approval and have 60 days to implement the asset reduction. If non-compliance continues beyond the first year, the Deputy Comptroller may impose an additional reduction of up to 7% annually, with the same plan submission and implementation requirements applying each successive year until full compliance is achieved.

Jon Hill wrote in Law360 that this is only the second time “that a federal banking agency has slapped such handcuffs on a financial institution’s overall growth.” The first was Wells Fargo, slapped for its fraudulent accounts scandal. Moreover, while the Wells Fargo “cap has remained in place much longer than many observers originally expected, the OCC has designed its cap for TD Bank with more of a need for remedial speed in mind. In particular, the OCC order establishing the cap includes express provisions that allow the agency to reduce the size limit — that is, tighten the cuffs — by up to 7% annually if the bank does not meet certain deadlines for strengthening its U.S. anti-money laundering compliance.” The article quoted Julie A. Hill, a banking law professor and dean at the University of Wyoming College of Law, for the following, “where the asset cap has gone on for years and years as the bank has tried to get compliant.”

Put Money Where Their Mouth Is

Even more than the commitment to do business ethically and in compliance with its AML/BSA requirements, the Bank must also financially commit to compliance. The Order requires that before the Bank can declare or pay dividends, engage in share repurchases, or make any other capital distributions, the Board of Directors must certify in writing to the Examiner-in-Charge that adequate resources and staffing have been allocated to the remediation efforts required by the OCC’s order. This certification must be submitted at least 30 days before any proposed capital action. It must include a detailed description of the Bank’s current allocation of compliance resources, its progress in remediation, any anticipated changes in resource allocation, and the funding source for the proposed payment or distribution. The goal is to ensure that remediation efforts take priority over capital distributions.

Join us next time, where I will consider TD Bank and the Caremark Doctrine.

Resources

OCC

OCC Press Release

Consent Order 

Civil Money Penalty 

DOJ

TD Bank US Holding Company Information

TD Bank N.A. Information

TD Bank US Holding Company Plea Agreement and Attachments

TD Bank N.A. Plea Agreement and Attachments

Merrick Garland Remarks

Nicole Argentieri Remarks

FinCEN

Press Release

Consent Order

Categories
Blog

TD Bank: Part 4 – Watergate, Actual Knowledge and Conscious Indifference

Mike Volkov often told the story of watching the Watergate Hearings as a teenager and being a seminal influence on his later professional life in the legal profession and government service. It was my first exposure to long-term Congressional hearings, at least when they were not the claptrap theater we have in place today. Perhaps the single thing I remember the most clearly was Tennessee Senator Howard Baker’s question, “What did the President know, and when did he know it?” The answer that we learned during the Watergate hearings was that President Nixon had known all along that the crimes of Watergate originated in the White House. Today, I want to use that question to explore what TD Bank knew, when they knew, and what that tells us about the culture of the world’s 30th-largest bank and 10th-largest bank in the US.

Prior OCC, FinCEN, and DOJ Enforcement Actions

In September 2013, the OCC and FinCEN levied a $37.5 million civil monetary penalty against the Bank for violating the Bank Secrecy Act (BSA) related to a Ponzi scheme run by a Florida attorney. Despite the numerous AML alerts triggered by its transaction monitoring system, the Bank failed to identify and report approximately $900 million in suspicious activity. This failure stemmed, in part, from inadequate anti-money laundering (AML) training for both AML and retail personnel. FinCEN emphasized that poorly resourced and trained staff managing critical compliance functions is unacceptable, underscoring the importance of adequate training and resources in compliance programs.

Following these enforcement actions, the Bank needed to adapt its transaction monitoring system to address its deficiencies substantively. The OCC had directed the bank to establish policies and procedures that could respond systematically and promptly to environmental or market changes, such as developing new monitoring scenarios. However, the bank’s failure to implement these recommendations meant it could not effectively mitigate emerging risks. This oversight revealed significant gaps in the Bank’s AML compliance efforts, particularly its ability to adjust its program to evolving threats.

In 2015, the OCC instructed the Bank to enhance its transaction monitoring program for high-risk customers, who were subject to the exact scenarios and thresholds as the rest of the Bank’s customers despite their higher risk profile. In 2016,  the AML function and the Bank technology teams began to develop new high-risk customer scenarios. That effort was put on hold in October 2016 by AML executives due to a lack of resources. After being briefly revived in early 2017, this project was again put on hold, this time by the head of AML at the Bank partly due to “cost.” Although US-AML leadership informed the OCC during its 2017, 2018, and 2019 examinations that these scenarios were in development, the Bank never implemented the required enhanced transaction monitoring of high-risk customers. By 2018, the OCC determined that the Bank’s planning and execution of its AML technology systems remained insufficient. The Bank had delayed implementing key AML technology projects, which directly contributed to its failures around AML compliance.

The Bank even misrepresented itself to the Department of Justice (DOJ). In February 2018, the Bank entered a settlement over its failure to file Suspicious Activity Reports (SARs). The Bank’s issues were partly due to its cessation of transaction monitoring scenario threshold testing. The Bank’s US-AML executives were aware of this resolution and acknowledged the importance of monitoring transactions for suspicious activity. One key AML leader at THE BANK emphasized that their AML team reviewed similar enforcement actions to ensure their compliance programs aligned with regulatory expectations, particularly around scenario threshold testing.

He explained to the AML Oversight Committee that the Bank conducted a detailed analysis below scenario thresholds to determine if SARs should have been filed, adjusting thresholds accordingly. This approach was intended to avoid the failures that led to the other bank’s settlement. However, despite these assurances, by early 2018, THE BANK’s AML team and its technology partners effectively halted its threshold testing due to competing priorities and resource limitations.

As a result, between 2018 and 2022, the Bank conducted threshold testing, or “quantitative tuning,” on only one out of approximately 40 U.S. transaction monitoring scenarios. This significant reduction in testing left gaps in the Bank’s AML compliance program, potentially exposing the bank to similar risks and regulatory scrutiny that had affected other institutions in the industry.

Where Was Internal Audit?

The question in these massive enforcement actions is often, ‘Where was the internal audit?’ Regarding the Bank, the answer is simple: Right Here, Doing Our Job. In 2018, the Bank’s Internal Audit function uncovered a critical issue within the bank’s AML program: the high-risk jurisdiction transaction monitoring scenarios were based on an outdated list, meaning the bank was not flagging transactions from jurisdictions currently deemed high-risk. This oversight severely impacted the bank’s ability to monitor and address risks associated with these regions. The findings revealed a gap in how the bank’s transaction monitoring system adapted to evolving regulatory expectations and global risk landscapes, compromising the effectiveness of its AML efforts.

By 2020, Internal Audit highlighted even more deficiencies in the bank’s AML compliance, specifically related to the governance and review of transaction monitoring scenarios. Among the key issues were a need for formal timelines for completing scenario reviews, some of which had been outstanding since 2017, and the failure to implement proposed changes from the previous year. Moreover, there needed to be a formal process or documentation to guide the promotion of new monitoring scenarios, a governance gap mirroring issues identified by the OCC seven years earlier. These systemic failures indicated a troubling lack of progress in strengthening the bank’s AML compliance framework.

Despite the findings from 2018 and 2020, Internal Audits reviewed in the following years revealed that these issues remained unresolved. The Bank’s Board of Directors was informed of these ongoing deficiencies and remediation plans, yet the persistent gaps in governance and scenario management continued to hinder the bank’s ability to respond to AML risks effectively. For those keeping score at home, that means Actual Knowledge at the Board.

Three Clarion Calls

Are you beginning to see a pattern here? The Bank engaged third-party consultants who identified significant weaknesses in its AML program and reported these issues to the Bank’s AML leadership. In 2018, one consultant noted that increasing regulatory requirements and transaction volumes would pressure AML operations, making it difficult to meet demands and deadlines. Additionally, the consultant found that The Bank’s testing of its transaction monitoring scenarios took less than the industry average, highlighting inefficiencies in its ability to assess and capture suspicious activity.

In 2019, another consultant flagged sub-optimal transaction monitoring scenarios based on outdated parameters. These outdated scenarios generated many alerts, overwhelming the AML team and limiting their ability to focus on truly high-risk customers and transactions. This finding pointed to a broader issue in the bank’s ability to adapt its monitoring systems to changing regulatory and risk environments, significantly undermining the effectiveness of its AML compliance efforts.

In 2021, a third consultant identified additional limitations within the Bank’s transaction monitoring program, particularly its technology infrastructure. The consultant found that the bank faced technological barriers that restricted its ability to develop new scenarios or adjust existing parameters, further hampering its AML efforts. These ongoing challenges reflect a broader need for the Bank to modernize its systems and ensure its AML program is agile enough to meet regulatory expectations and address emerging risks effectively.

The AML Leadership Team

During the relevant period, the Bank’s AML leadership consisted of key individuals whose responsibilities significantly shaped the Bank’s approach to AML compliance, and, more importantly, all knew of the Bank’s AML deficiencies. They were identified as Individual-1, Individual-2, and Individual-3 in the Information. Individual-1 was hired in 2013 as VP of AML Operations and rose to become the sole Chief AML Officer by 2019, overseeing the bank’s global AML program. His role included setting the annual AML budget, developing strategic priorities, and regularly reporting to the board of directors. Individual-1’s oversight extended to AML technology services and the U.S. Financial Intelligence Unit (FIU), reflecting his pivotal role in the U.S. and global AML operations.

Individual 2 joined THE BANK in 2014 as Head of the U.S. FIU and was critical in overseeing the investigative teams responsible for reporting suspicious activities and managing high-risk customers. By 2019, Individual-2 had assumed the role of BSA Officer and Deputy Global Head of AML Compliance, where they were responsible for managing the U.S. AML program. However, despite these responsibilities, Individual 2 faced limitations due to the Chief AML Officer’s direct control over AML technology, a crucial aspect of the bank’s AML operations, which created challenges in overseeing technology-related AML issues.

Individual-3, a vice president within AML Operations, took on significant responsibilities within the U.S. FIU, especially between 2017 and 2018. In this role, Individual-3 managed the initial review of transaction monitoring alerts and the handling of Unusual Transaction Referrals (UTRs) and reports of suspicious activity submitted by employees. Together, these key figures shaped THE BANK’s AML efforts, though the division of responsibilities and challenges with AML technology governance highlighted areas of vulnerability within the bank’s compliance framework.

What did the Bank know, and when did they know it? As the Information rather dryly noted, “US-AML, including senior leadership, were aware of the lack of domestic ACH and check monitoring.” More importantly, like President Nixon, they knew about their AML failures and consciously chose not to do anything about them.

Resources

Join us tomorrow when I will consider the reckoning for the Bank.

Resources

 OCC

OCC Press Release

Consent Order 

Civil Money Penalty 

DOJ

TD Bank US Holding Company Information

TD Bank N.A. Information

TD Bank US Holding Company Plea Agreement and Attachments

TD Bank N.A. Plea Agreement and Attachments

Merrick Garland Remarks

Nicole Argentieri Remarks