You can find many well-known banks that people trust in the United States, such as JP Morgan Chase & Co., Bank of America, U.S. Bancorp, Goldman Sachs, and Citigroup, to name a few. However, one bank has lately run into controversy for committing fraudulent activities that resulted in them paying a hefty fine.
The bank currently facing backlash is Wells Fargo, one of the leading banks with more than $1.97 trillion in assets. They also tend to 70 million customers around the country and have at least 260,000 employees.
The 3 Billion Dollar Settlement
Wells Fargo recently made millions of fake accounts to boost and meet sales goals. The bank has recently agreed to pay $3 billion to settle the fraudulent claims, as stated by the Securities and Exchange Commission last Friday.
The bank hoodwinked many of its investors about a strategy of selling extra financial products to existing clients. The SEC also said that the “cross-sell” strategy was inflated by services and accounts unneeded, unused, or unauthorized. They later stated that Wells Fargo created and opened millions of unauthorized or fraudulent financial accounts from 2002 to 2016. They even pressured clients to buy some of their unnecessary products.
The co-director of the SEC’s division of enforcement, Stephanie Avakian, said that “Wells Fargo has been misleading investors frequently through a misleading performance metric. The bank also claimed it to be the cornerstone of its Community Bank business model and its capacity to grow earnings and revenue.”
Ever since the bank got caught, they agreed not to carry out the future violations and repay a $500 million civil penalty that the SEC will distribute to the bank’s investors.
A picture of Wells Fargo bank situated in the eastern region of the San Francisco Bay Area
Recently, Wells Fargo CEO Charlie Scharf said that the bank had eliminated all product-based sales goals, reorganized its compensation based on client outcomes, and strengthened oversight systems and customer consent.
After Friday’s settlement, it ended a large part of Wells Fargo’s legal problems associated with its sales practices. The bank also reshuffled the entire executive ranks after the scandal claimed two chief executives. The settlement shows indications that the bank’s management team is on the correct path to reconciling with regulators over their fraudulent sales operations.
Marty Mosby stated that the settlement would let Wells Fargo earn less money over a short period, which is not good news for investors. He also added that the settlement and the management change could help put Wells Fargo in the right direction.
However, the $500 million settlement will barely put a dent in Wells Fargo’s $200 billion profit from the sales generated over the last ten years. The fine paired with a delayed prosecution agreement is the price of doing business for a bank with at least $1.9 trillion in assets. The third-largest bank in the United States should be held fully accountable for its crimes, as Rep. Maxine Waters wrote in a statement.
