Dive Brief:

• Wells Fargo has agreed to pay a $37.3 million fine to settle a Justice Department (DOJ) lawsuit accusing the bank of overcharging 771 commercial clients that used the bank’s foreign-exchange services between 2010 and 2017.
• The penalty comes on top of $35.3 million the bank paid in restitution to harmed clients, many of which were small and midsize businesses.
• Monday's fine marks the second penalty the bank has taken this month. The Office of the Comptroller of the Currency (OCC) fined the bank $250 million for failing to make good on a 2018 consent order to promptly “detect, prevent and quantify inaccurate loan modification decisions.”

Dive Insight:

Wells Fargo admitted that many of its foreign-exchange sales specialists applied larger sales margins or spreads than they indicated they would and, when customers asked about that higher pricing, the specialists gave false explanations, the DOJ said Monday in its press release.

In what bank employees allegedly dubbed a “big figure trick,” staff duped currency customers by switching digits in the exchange rate to inflate the transaction price, according to the DOJ. For example, if the price to purchase a euro was $1.234, staff would change the price to $1.243.

Court documents reveal one FX sales specialist told a colleague that a client “didn’t flinch at the big fig the other day. Want to take a bit more?”

In another maneuver, nicknamed the “BSwift Pinata,” Wells Fargo employees declined to provide timely notice of incoming wire transfers, called BSwifts, to customers, the DOJ said. Instead, staff at the bank would abuse range-of-day pricing, and wait until the end of day to cherry-pick the most favorable rate for the bank and the worst for the customer, the DOJ said. An FX sales specialist said this practice was like taking candy from a pinata, according to the DOJ's complaint.

Sometimes the moves were simpler. On occasion, FX sales specialists would email customers falsified transaction data to justify excessive spread. Wells Fargo staff also allegedly charged larger spreads to customer representatives that were perceived as less experienced in the foreign-exchange market.  

Wells Fargo used compensation incentives to create an atmosphere uniquely conducive to fraud, the DOJ said. “By giving improper financial incentives to FX sales specialists to prioritize maximizing FX revenue over all else, while simultaneously providing no meaningful or effective oversight to prevent its employees from fraudulently overcharging customers, Wells Fargo created a work environment in which defrauding or otherwise taking advantage of customers became normal business practice," officials said in the complaint.

Wells Fargo disavowed its past practices in a statement Monday, according to Bloomberg. “This past behavior was unacceptable,” Wells Fargo said in a statement, adding that the firm has fully remediated impacted clients. “We have significantly improved our business policies, procedures and oversight related to the management and pricing of FX transactions.”