In its dropped lawsuit, the CFPB claimed that hundreds of thousands of consumers filed fraud complaints to Wells Fargo, JP Morgan, and Bank of America and were denied help, with many being told to contact the fraudsters directly to recover their money. The major banks were alleged of failing to properly investigate the customer complaints and failing to reimburse such their customers for valid fraud claims.

The lawsuit originated from a investigation in 2021. The investigation found that three of the nation’s largest banks allegedly “rushed to launch a payment system without implementing basic protections for their customers.” As a result, “Defendants failed to take steps to ensure consumers were protected from fraud, while nevertheless marketing Zelle as safe and secure.”

This lawsuit was originally brought under the leadership of former CFPB Director Rohit Chopra. Chopra, who was appointed during the Biden administration, was fired in February, weeks after the commencement of the Trump administration. “This is about financial institutions fulfilling their basic obligations to protect customers’ money and help fraud victims recover their losses,” according to former CFPB Director Rohit Chopra said at the time. “These banks broke the law by running a payment system that made fraud easy, and then refusing to help the victims.”

Although the CFPB sought to hold those who failed to protect consumers from fraud accountable, its dismissal of the case has gathered much support. “Banks have and consistently do follow the law in offering services through Zelle,” Consumer Banks Association President and CEO Lindsey Johnson said. “In a time when fraud and scam activity is surging across industries and government alike, we look forward to moving past finger-pointing and political grandstanding and, instead, working constructively with policymakers to counter the root causes of these threats.”

This dropped lawsuit is the latest in a series of voluntary dismissals by the CFPB, which recently withdrew several cases against companies like Capital One and Rocket Homes. All of these lawsuits were initially filed during Chopra’s tenure as CFPB Director.

The CFPB has been rapidly dismantled in a matter of weeks, with employees ordered to halt nearly all work, approximately 150 staff members dismissed, and the bureau’s D.C. headquarters closed. This comes at a time in which President Trump has explicitly expressed his goal in shrinking the agency.  

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Medicare Advantage, also known as Medicare Part C, allows Medicare beneficiaries to enroll in managed care insurance plans called Medicare Advantage Plans (MA Plans). These plans receive a per-person payment to provide Medicare-covered benefits to their enrollees. The Centers for Medicare and Medicaid Services (CMS), which administers the Medicare program, adjusts these payments based on demographic data and the medical diagnoses of each enrollee. These adjustments, referred to as “risk scores,” ensure that beneficiaries with more costly medical needs receive higher risk-adjusted payments to their MA Plan.

Independent Health operates MA plans for beneficiaries living in western New York. As alleged by the United States, Independent Health created a wholly owned subsidiary, DxID LLC, to retrospectively search medical records and query physicians for information that would support additional diagnoses that could be used to generate higher risk scores, and DxID provided these services to Independent Health and other MA Plans.

The United States filed a complaint alleging that, from 2011 through at least 2017, Independent Health, with the help of DxID and its founder and chief executive, Betsy Gaffney, knowingly submitted diagnoses to CMS that were not supported by the beneficiaries’ medical records in order to inflate Medicare’s payments to Independent Health.

“The government expects those who participate in Medicare Advantage to provide accurate information to ensure that proper payments are made for the care received by enrolled beneficiaries,” said Deputy Assistant Attorney General Michael Granston of the Justice Department’s Civil Division. “Today’s result sends a clear message to the Medicare Advantage community that the United States will take appropriate action against those who knowingly submit inflated claims for reimbursement.”

“Medicare Advantage Plans that attempt to game federal programs for profit must be held accountable through rigorous oversight and enforcement,” said Deputy Inspector General Christian Schrank of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “HHS-OIG will continue to work with our law enforcement partners to root out fraud, waste and abuse in federal health care programs.”

As part of the settlement agreement, Independent Health will pay $34,500,000 upfront, along with contingent payments of up to $63,500,000 on behalf of itself and DxID, which ceased to exist in 2021. The settlement amount was determined based on Independent Health’s financial capacity. Additionally, Gaffney will make a separate payment of $2,000,000.

In connection with the settlement, Independent Health entered into a five-year corporate integrity agreement (CIA) with HHS-OIG. The CIA requires, among other things, that Independent Health hire an Independent Review Organization to annually review a sample of Independent Health’s Medicare Advantage patients’ medical records and internal controls to verify the accuracy of risk adjustment payments.

The post Independent Health to Pay $98 Million to Resolve Medicare Fraud Allegations appeared first on Compliance Chief 360.

The ISC’s objective is to strengthen the cohesion between federal, state, and local agencies, enhance opportunities to collaborate on cases to protect investors, provide insight and guidance across the ecosystem to those who may not frequently operate in this space, and create an outlet to combat financial fraud.

The ISC launched with representatives from more than 100 departments and agencies, including federal agencies, state offices of attorneys general and state police, and local police departments and sheriff’s offices.

“The Interagency Securities Council will help front line investigators stay abreast of emerging threats and fact patterns to protect their communities from securities fraud, while supporting the efforts of federal, state, and local law enforcement partners across the country,” said Gurbir Grewal, Chair of the ISC and Director of the SEC’s Division of Enforcement.

“As financial frauds become more complex, investors benefit from the government – at all levels – working together and sharing information to protect and inform the public,” said Cristina Martin Firvida, the SEC’s Investor Advocate.

About the Interagency Securities Council

The ISC is open to law enforcement and regulatory agencies, and members participate in discussions with experts on emerging threats, hear from investigators conducting and supervising investigations, and explore case study examples of agencies employing innovative approaches to combat financial fraud. The ISC also serves as an opportunity to connect and share information with the larger law enforcement community that less frequently deals with securities law violations, such as police/sheriff departments and tribal- and military-community law enforcement.  

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According to the SEC’s complaint, Silvergate, Lane, and Fraher misled investors in stating that Silvergate had an effective BSA/AML compliance program and conducted ongoing monitoring of its high-risk crypto customers, including FTX, in part to deny public rumors that FTX had used its accounts at Silvergate to enable FTX’s misconduct. In reality, Silvergate’s automated transaction monitoring system failed to monitor more than $1 trillion of transactions by its customers on the bank’s payments platform, the Silvergate Exchange Network.

“At all times, but especially during moments of crises, public companies and their officers must speak truthfully to the investing public. Here, we allege that Silvergate, Lane and Fraher fell not only woefully, but also fraudulently, short in that regard,” said Gurbir Grewal, Director of the SEC’s Division of Enforcement. “Rather than coming clean to investors about serious deficiencies in its compliance programs in the wake of the collapse of FTX, one of Silvergate’s largest banking customers, they doubled down in a way that misled investors about the soundness of the programs. In fact, because of those deficiencies, Silvergate allegedly failed to detect nearly $9 billion in suspicious transfers among FTX and its related entities. Silvergate’s stock eventually cratered, wiping out billions in market value for investors.”

SEC Alleges Silvergate Misrepresented Its Financial Condition

The SEC’s complaint also alleges that Silvergate and Martino misrepresented the company’s bleak financial condition during a liquidity crisis and bank run following FTX’s collapse. The complaint alleges that Silvergate and Martino, in an earnings release and earnings call, understated Silvergate’s losses from expected security sales and misrepresented that it remained well-capitalized as of December 31, 2022. In March 2023, Silvergate announced it would wind down its banking operations, and its stock eventually plummeted to near $0.

The SEC charged Martino with violating certain of the antifraud and books-and-records provisions of the federal securities laws, and with aiding and abetting certain of Silvergate’s violations. The complaint also charges Silvergate, Lane, and Fraher with fraud and charges Silvergate with violating certain reporting, internal accounting controls, and books-and-records provisions.

Without admitting or denying the allegations, Silvergate agreed to a settlement ordering it to pay a $50 million civil penalty and imposing a permanent injunction to settle the charges. Lane and Fraher also settled the charges without admitting or denying the allegations, agreeing to permanent injunctions, five-year officer-and-director bars, and fines of $1 million and $250,000 respectively.

All the settlements require court approval, and Silvergate’s payment may be offset by penalties paid to the Board of Governors of the Federal Reserve System (FRB) and/or the California Department of Financial Protection and Innovation (DFPI). In parallel actions, FRB and DFPI today announced settled charges against Silvergate.  

Jacob Horowitz is a contributing editor at Compliance Chief 360° 

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In 2019, Humana brought a lawsuit against Walgreens arguing that the company had overcharged its customers by inflating medication prices for over ten years. Humana alleged that the pharmacy chain made that lower pricing available without accounting for it in its customary prices, which led to higher claims payouts. In 2021, an arbitrator awarded Humana a $642 million settlement which Walgreens contested, describing the ruling as a “miscarriage of justice.” The companies have now settled on a $360 million payout, $150 million of which was paid off last month.

Humana specifically claimed that Walgreens provided substantial discounts on its drugs to customers through its Pharmacy Savings Club but didn’t include those sales in its regular prices reported to insurers, causing an increase in claims. Walgreens has explicitly denied these claims and argues that their deals with Humana only require them to report regular retail prices, not the special rates for club members. The pharmaceutical company claims that the arbitrator deciding the case didn’t understand their agreements correctly and was partially biased due to his financial ties with Humana’s legal team.

While securing this settlement with Humana, Walgreens continues to face legal actions, including a lawsuit from Blue Cross Blue Shield alleging the inflation of prescription drug claims. The pharmaceutical giant has completed a large number of expensive legal settlements over the past years, including some that result from Walgreens’ involvement in the opioid epidemic.  

Jacob Horowitz is a contributing editor at Compliance Chief 360°

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Simon Chu, 68, of Chino Hills, California, and Charley Loh, 65, of Arcadia, California, were convicted of conspiracy to defraud the U.S. Consumer Product Safety Commission (CPSC) and failure to furnish information as required by the Consumer Product Safety Act (CPSA).

The defective dehumidifiers sold by Chu and Loh’s two corporations were included in multiple recalls of a larger number of defective dehumidifiers manufactured by Gree Electric Appliances Inc. of Zhuhai (Gree Zhuhai) in China. According to the recall notices, more than 450 reported fires and millions of dollars in property damage have been linked to the recalled Gree Zhuhai dehumidifiers.

Gree USA was sentenced in April to pay a $500,000 criminal fine after pleading guilty to failing to notify the CPSC about the problems with the dehumidifiers. The fine, along with provisions to pay restitution to victims, was part of a $91 million criminal resolution with Gree USA, Gree Zhuhai and another related Gree company, Hong Kong Gree Electric Appliances Sales Co. Ltd. This resolution is the first corporate criminal enforcement action ever brought under the Consumer Product Safety Act.

Requirement to Report Dangerous Defects

According to the indictment of Chu and Loh, Chu was part owner and chief administrative officer of Gree USA Inc. and another corporation in City of Industry, California, that distributed and sold to retailers for consumer purchase dehumidifiers that were made by Gree Zhuhai in China. Loh was part owner and chief executive officer of the same two corporations.

The Consumer Product Safety Act requires manufacturers, importers, and distributors of consumer products to report “immediately” to the CPSC information that reasonably supports the conclusion that a product contains a defect that could create a substantial product hazard or creates an unreasonable risk of serious injury or death. This duty also applies to the individual directors, officers, and agents of those companies.

The indictment alleged that as early as September 2012, Chu, Loh and their companies received multiple reports that their Chinese dehumidifiers were defective, dangerous, and could catch fire. They also allegedly knew that they were required to report this product safety information to the CPSC immediately. Despite their knowledge of consumer complaints of dehumidifier fires and test results showing defects in the dehumidifiers, the indictment alleged that Chu and Loh failed to disclose their dehumidifiers’ defects and hazards for at least six months while they continued to sell their products to retailers, for resale to consumers.

“Companies and their employees should immediately report known dangerous consumer products to the Consumer Product Safety Commission so the products can be recalled as soon as possible,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The Justice Department will prosecute companies and their employees when they willfully put the public in harm’s way by failing to report known dangerous products.”

“It is critical to hold corporate executives accountable for misconduct,” said U.S. Attorney Martin Estrada for the Central District of California. “The importation and sale of defective consumer products can lead to injury and death, and this verdict sends a clear message that putting profits over safety will not be tolerated.”

“The safety of the American public is the top priority for HSI, and products like these can turn an ordinary purchase into deadly consequences.” said Special Agent in Charge Eddy Wang for Homeland Security Investigations (HSI) Los Angeles. “HSI Los Angeles will continue to work diligently to ensure our supply chain is safe from products that can harm consumers.”

The jury acquitted both defendants on one count of wire fraud.  

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Sometimes the violations are fairly technical in nature and sometimes they are brazen frauds. Regardless, the fines and penalties can run into the billions of dollars. These examples remind us that compliance failures can be massively expensive, and its worth investing in the lines of defense that can help keep them from occuring, such as the compliance department, risk management, legal, and, of course, internal audit.

In just the last ten years alone, the number of fines has reached some staggering levels. From time to time, some banks get a little too zealous about padding their accounting sheets. When this happens, it can fall under the category of a bank scheme. From outright fraud to behaviors that are far from transparent or ethical, these are some of the biggest compliance fines in recent history that have been levied against financial institutions domestic and foreign. Let’s dive into the biggest compliance violations and penalties in the past decade.

14) HSBC — The AML Program that Wasn’t — $1.256 Billion

AML is short for anti-money laundering program. In short, banks are expected to uphold business practices and regulations that don’t support financial crimes. However, in 2012, the U.S. Department of Justice (DoJ) found that HSBC Bank USA had an AML program that wasn’t much more than for show.

Instead, the bank tended to look the other way regarding its foreign account holders and associated activities. HSBC was found in violation of the Banking Secrecy Act, Trading with the Enemy Act (TWEA), and the International Emergency Economic Powers Act (IEEPA) after evidence was uncovered of questionable transactions for clients in sanctioned nations like Iran, Cuba, Libya, Sudan, and Burma.

HSBC was found liable for aiding in the laundering of at least $881 million in drug-related finances over several years, leading to the $1.256 billion fine.

13) The MAN Group — Poor Trading Oversight — $1.312 Billion

Hedge funds aren’t immune to oversight from financial regulators either. The MAN Group is a storied hedge fund with a history that began in 1783 and is one of the largest publicly traded funds in the world. The brokerage division emerged as a separate entity known as MF Global in 2007, and that’s when the problems began.

To summarize, the firm was constantly found in violation of trading regulations, poor debt provisions, and even difficulty with maintaining liquidity to cover bad calls. While the company went bankrupt in 2011, the investigations continued into the company and its core directors — including the CEO John Corzine.

The Commodity Futures Trading Commission (CFTC) was the investigating party. While the company was ordered to pay $1.212 billion to customers from the Federal Court in New York, and a $100 million penalty with the CFTC, individual directors also paid heavy fines. Corzine himself settled with the CFTC for $5 million and agreed to a lifetime ban from CFTC markets.

12) JPMorgan Chase — The Worst Banking Client Ever — $1.7 Billion

You can’t have a “best of the worst” financial fines list without including Bernie Madoff. He’s known for having pulled off the largest Ponzi scheme in history — defrauding his customers while grossing an estimated $65 billion over several decades. In 2009, when the markets were still reeling from the bursting housing bubble, Madoff was found guilty of fraud and sentenced to 150 years in prison.

Meanwhile, contributing banking institutions like JPMorgan Chase were also found liable because of poor oversight that allowed Madoff to swindle his victims with impunity. To avoid prosecution, the multinational bank agreed to pay $1.7 billion in restitution to Madoff’s victims.

11) SAC Capital Advisors — An Inside Job — $1.8 Billion

Yet another hedge fund makes the list with one of the more considerable fines levied for insider trading. Insider trading is when an individual or institution gets advanced non-public information about a publicly traded stock, thereby giving them an unfair advantage over other consumer or commercial traders. SAC Capital Advisors had been under investigation by the Securities and Exchange Commission (SEC) for years but things came to a head in 2013.

The New York firm was found guilty of not just insider trading, but wire fraud and securities fraud. Along with a hefty $1.8 billion fine, several individual traders found themselves headed to jail. To date, this is the largest fine for insider trading in U.S. history. Of that amount, half was set aside for criminal fines and the other half for civil fines related to money laundering and forfeiture actions. Another result was the company and its subsidiaries being barred from ever taking any future outside investor funds.

10) Credit Suisse — Facilitating the Tax Dodge — $2.5 Billion

The desire to reduce your tax liability is normal. Engaging in deceit to do so is a great way to either see the inside of a jail cell or pay hefty fines. Credit Suisse was under investigation for years because of allegations regarding unscrupulous accounting to aid U.S. customers in falsifying income tax returns and accompanying documents that were submitted to the IRS.

However, the bank’s questionable arithmetic wasn’t just limited to the U.S. customers. Taxation agencies in other countries including Brazil and Germany also had their eyes on Credit Suisse. In the U.S., the bank was ordered to pay $1.8 billion. However, along with additional fines, the total amounts to $2.5 billion.

9) ‘The Cartel’ — The LIBOR Price-Fixing Scandal — $2.5 Billion

Price fixing is never a good idea, but sometimes even banks need to be reminded that monopolies are illegal. The LIBOR scandal involves criminal charges regarding a foreign currency exchange that involves several major multinational banks between 2007 and 2013. Citicorp, Barclays PLC, JPMorgan Chase & Co, The Royal Bank of Scotland plc, and UBS AG all pled guilty to felony charges for each member’s involvement in the scheme.

Simply put, forex (foreign exchange) traders at the banks worked in tandem to manipulate currency values between the U.S. dollar and the European euro for financial gain. As if this isn’t enough, the traders called themselves “The Cartel” and even initiated private chat rooms and codes to influence exchange rates.

Typically, the exchange rates were edited twice daily, at 1:15 PM for the European Central Bank fix, and at 4:00 PM for the World Markets/Reuters fix. The traders would agree to only buy and sell at specific times, ensuring minimal losses for participating member banks. As with many other entries on this list, that $2.5 billion fine isn’t the final word for the exposed institutions.

8) Wells Fargo — The Phony Accounts Scandal — $3 Billion

One of the most recent offenders hits close to home with the American banking giant, Wells Fargo. Unlike many of the other entries on this list, Wells Fargo gets a mention because the firm repeatedly engaged in illegal activity that’s alleged to have harmed over 16 million consumer accounts.

Highlights from the financial company’s misdeeds include opening up phantom banking and credit accounts and banking services under real customer names without consent. The reason for such misdeeds? The bank demanded high sales quotas from its employees. As a mea culpa, the bank agreed to a $3 billion settlement to the DoJ. However, the Consumer Financial Protection Bureau (CFPB) is still investigating other allegations against Wells Fargo so that figure could still increase.

7) Wells Fargo (Again) — Rampant Mismanagement — $3.7 Billion

As you can see, several banks on this list don’t ever seem to learn a lesson, becoming repeat offenders. This time, Wells Fargo returns over additional claims of mismanagement and consumer abuses. The CFPB settled with the bank for $3.7 billion dollars. Allegations included that customer payments were misapplied for mortgages and auto loans.

Meanwhile, other consumers were hit with incorrect interest charges. In severe cases, people lost their homes or cars as a result of the banks errors. Note that this settlement includes a $1.7 billion civil penalty and over $2 billion that will be given directly to customers affected by the bank’s misdeeds.

6) Credit Suisse (Again) — Front-Running the Financial Crisis — $5.3 Billion

Balancing your books is one thing. But knowing that your business practices are going to contribute to a massive economic crisis — and using underhanded tactics to stave off the damage before it happens by selling assets you know are worth far less — is criminal. Several banks found themselves on the wrong side of the law after the subprime mortgage crisis, including Credit Suisse.

Institutions determined to significantly influence activities that ushered in the Financial Crisis—what some call the “Great Recession”—later learned in the following decade that those behaviors wouldn’t go unpunished. Credit Suisse was ordered to settle in the amount of $5.3 billion for selling toxic debts before the financial crisis took hold. Roughly $2.48 billion of this figure was paid as a civil penalty with $2.1 billion used for consumer relief.

However, this is just one part of the fallout from the subprime mortgage crisis as almost every major bank across the U.S. and many multinationals also faced steep fines for poor oversight and intentionally providing loans to unsuitable customers.

5) Goldman Sachs —Banking the Malaysian Thieves — $5.4 Billion

No one likes a thief. But if you steal from government funds, don’t be surprised when the long arm of the law finds you. Goldman Sachs found itself in hot water in 2020 for participating in the Malaysian 1MDB scandal. The event refers to millions that were stolen from the state investment fund.

While the masterminds behind the scandal were local Malaysian government officials and accomplices, Goldman Sachs was accused of facilitating money laundering to divert money from the state fund. To avoid further investigation and legal action, the bank agreed to pay a total of $5.4 billion to multiple global regulators including the DoJ in the United States. Additionally, the bank paid another $1.4 billion to Malaysia as part of a restitution settlement.

4) Deutsche Bank — Front-Running the Financial Crisis, Part II — $7.2 Billion 

Shoddy business practices that prioritize profit over sound actions will always catch up with you in the end. Deutsche Bank, a massive multinational bank headquartered in Germany, can attest to this as the financial institution was slapped with a $7.2 billion fine in 2016 for attempting to offload toxic assets ahead of the housing crash. Of that figure, roughly $4.1 billion is being set aside for consumer relief and loan modifications that will be spread out over the next five years.

3) BNP Paribas — Banking the Bad Guys — $8.973 Billion

Smart individuals and businesses know that trying to scheme around anti-terrorism laws is a bad idea. However, BNP Paribas, a French-based bank, apparently failed to get the memo. The bank was found in violation of both the IEEPA and TWEA in 2015 for processing billions of transactions through the U.S. financial system on behalf of sanctioned nations.

BNP Paribas was accused of “deliberately disregarding the law” according to the DoJ, working to cover its tracks in the process, while helping to support terrorism in countries such as Sudan, Iran, and Cuba. The bank was required to fork over $8.833 billion to the U.S. government as well as pay $140 million in fines, which gets you the $8.973 billion total.

2) JPMorgan Chase (Again) — Contributing to a Global Financial Meltdown ­— $13 Billion

The subprime mortgage crisis had a lot of dirty banking hands in the cookie jar. So, while many banks faced big fines, some were slapped with significantly higher ones. JPMorgan Chase found itself in the hot seat both for federal and civil claims because it participated in passing out poorly vetted mortgages to consumers. The bank agreed to settle for $13 billion in 2013 with the DoJ.

However, this bank wasn’t alone. You may remember that JPMorgan faced its day of reckoning along with the investment bank Bear Stearns and Washington Mutual. However, the two latter firms no longer exist. Both went defunct in 2008, with JPMorgan Chase opting to purchase them — which raised several red flags. Washington Mutual was absorbed into the Chase Bank brand while Bear Stearns was acquired under the investments division.

1) Bank of America — Contributing to a Global Financial Meltdown, Part II — $30.6 Billion

If there’s a biggest loser for “most fines paid” from the SMC scandal, it’s Bank of America. Yes, several banks paid a lot of money for their involvement in activities that destabilized the global economy. But, BofA has faced the most fines during this period. The big bank found itself agreeing to multiple settlements over the past decade to atone for its questionable practices.

The bank paid $11 billion as part of the $25 billion agreement with the five largest mortgage servicers in the United States. This was meant to address previous foreclosure and loan servicing abuses. But then, the bank paid $10.3 billion to Fannie Mae as part of a settlement in 2013. Again, in 2014, BofA paid $9.3 billion in a settlement with the Federal Housing Finance Agency.

Compliance is Crucial

This “best of the worst” list of compliance failures highlights a critical reality: non-compliance can cost you bigtime. Likewise, just because you get away with questionable behavior initially, doesn’t mean that regulators or government agencies won’t eventually come knocking on your door. In most of the cases we highlighted above, financial institutions were engaged in clearly criminal or at least unethical activities that they knew were problematic.

A program of solid internal controls and good oversight by compliance, risk management, and internal audit can go a long way to avoiding such massive fines and penalties.   

Osman Husain is the content lead at Enzuzo. He has a background in data privacy management via a two-year role at ExpressVPN and extensive freelance work with cybersecurity and blockchain companies. Osman also holds an MBA from the Toronto Metropolitan University.

Editor’s Note: This article was originally posted at Enzuzo and has been republished with permission.

The post The Most Expensive Financial Compliance Failures of the Last Decade appeared first on Compliance Chief 360.

Unethical sales tactics, in part, resulted in the CFPB enforcement action. For example, OneMain’s “written training materials directed employees to attempt to sell optional add-on products to consumers even when the employees [thought] the consumer [would] not want them, or the consumer previously declined optional add-on products when obtaining a prior loan,” the consent order stated.

Additionally, individual sales employees’ performance reviews were based, in part, on their coverages-per-loan (CPL) rate. According to some of OneMain’s former employees, “low CPL rates could lead to adverse employment consequences, including termination,” the order stated.

Deceitful Sales Tactics

According to the CFPB order, some of OneMain’s former employees explained that “a common method of selling optional add-on products was adding them onto a loan before showing the paperwork to the consumer (referred to by some former employees as “pre-packing”) and without verbally informing the consumer that the products were included or optional.”

“If the consumer identified the products and asked for their removal, employees were expected to make it seem difficult to remove the products,” the order stated. In other instances, “employees obscured written disclosures from consumers’ view or verbally contradicted them,” according to the order.

Fraudulent Refund Policy

The CFPB also found that OneMain “kept $10 million in interest charges despite its ‘full refund’ policy.” OneMain told borrowers they would receive a “full refund” on add-on purchases if they cancelled within a certain period, between 30 and 45 days.

“However, OneMain unfairly failed to refund interest charges for about 25,000 borrowers who signed up for add-ons—such as roadside assistance benefits, identity theft protection, or entertainment discounts,” the CFPB said. “Because of how OneMain precomputed interest on some loans, customers had already been charged significant amounts of interest that the company did not refund.”

Over the past four years, OneMain kept approximately $10 million in interest charges attributable to add-ons cancelled within its purported full refund period. Moreover, these practices violated the Consumer Financial Protection Act’s prohibition on unfair practices and amounted to a fraudulent refund policy, the CFPB said.

Settlement Details

OneMain will pay $10 million in consumer redress and an additional $10 million penalty to the CFPB’s victims’ relief fund. “We are ordering OneMain to refund borrowers it cheated and to clean up its business practices,” said CFPB Director Rohit Chopra.

In addition to the $20 million in redress and penalties, the CFPB also ordered OneMain to take measures to ensure future compliance. Specifically, OneMain must “stop its unlawful activities, adjust its policies to make cancellation of add-on products easier, double the period in which a consumer can cancel an unused add-on product without cost from 30 to 60 days, and include interest in refunds after add-on product cancellations at any time,” according to the CFPB’s order. 

PHOTO: BY TONY WEBSTER, USED UNDER LICENSE, CC-BY-2.0

Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.

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According to the allegations in the complaint, from its formation around late 2015 until in or about July 2020, Dominion Bank and Trust Company operated as a purported financial institution, which claimed it could extend or facilitate financing for small businesses in exchange for an advanced fee or deposit. In fact, this was a fraud scheme, the DoJ alleged.

From at least in or about October 2016 through in or about April 2020, Gerald Shaw served as the purported “chief compliance officer.” In that role, Shaw’s responsibilities included drafting various financial instruments sent to victims in exchange for payments.

The scheme worked like this: Victims were instructed to “wire tens or hundreds of thousands of dollars to Dominion Bank as a deposit or servicing fee for future financing or credit based on representations that Dominion Bank could provide such services. Those representations were false,” the DoJ stated. “In fact, no financing existed. The victims did not receive the promised credit. And the victims were generally unable to get their money back, as Dominion Bank typically did not return funds to victims.”

Instead, the purported bank “kept victims’ money and, in some instances, even responded to refund requests by sending invoices for additional amounts,” the DoJ stated. In total, approximately 60 individual and corporate victims were schemed out of more than $4 million.

In June 2018, Shaw wrote in an email directed to two Dominion Bank officers that the bank was “20 weeks behind” in paying his “$500 a week salary.” He added, “‘On several occasions, I have indicated to you that I know Dominion does not have the money to pay my $500 a week [salary].’ Nonetheless, Shaw continued his involvement in the scheme,” the DoJ stated.

Shaw is being charged with one count of conspiracy to commit wire fraud and one count of wire fraud, each of which carry a maximum potential prison sentence of 20 years. 

Jaclyn Jaeger is a contributing editor at Compliance Chief 360° and a freelance business writer based in Manchester, New Hampshire.

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The 2022 Corruption Perceptions Index (CPI), released this month by bribery watchdog Transparency International, shows that most of the world continues to fail to fight corruption. It finds that 95 percent of countries have made little to no progress on fighting corruption since 2017.

Indeed, several have declined on TI’s corruption scale. Since 2017, ten countries significantly declined on their CPI scores. The significant decliners are: Luxembourg (77), Canada (74), the United Kingdom (73), Austria (71), Malaysia (47), Mongolia (33), Pakistan (27), Honduras (23), Nicaragua (19) and Haiti (17). Canada has declined eight points on the index since 2017, while the United Kingdom has fallen nine points. Both are among the biggest decliners during the last five years.

Governments hampered by corruption lack the capacity to protect the people, while public discontent is more likely to turn into violence, said TI in its report. This vicious cycle is impacting countries everywhere from South Sudan (13) to Brazil (38).

“Corruption has made our world a more dangerous place, says Delia Ferreira Rubio, Chair of Transparency International. “As governments have collectively failed to make progress against it, they fuel the current rise in violence and conflict—and endanger people everywhere. The only way out is for states to do the hard work, rooting out corruption at all levels to ensure governments work for all people, not just an elite few.”

Not Much Rotten in Denmark

The CPI ranks 180 countries and territories by their perceived levels of public sector corruption on a scale of zero (highly corrupt) to 100 (very clean). The United States was ranked as the 24th least corrupt country with a 69 on the scale, up 2 clicks from its score in 2021.

The CPI global average remains unchanged at 43 for the eleventh year in a row, and more than two-thirds of countries have a serious problem with corruption, scoring below 50.

• Denmark (90) tops the index this year, with Finland and New Zealand following closely, both at 87. Strong democratic institutions and regard for human rights also make these countries some of the most peaceful in the world according to the Global Peace Index.
• South Sudan (13), Syria (13) and Somalia (12), all of which are embroiled in protracted conflict, remain at the bottom of the CPI.
• 26 countries—among them the United Kingdom (73), Qatar (58) and Guatemala (24)—are all at historic lows this year.
• Eight countries improved on the CPI during that same period: Ireland (77), South Korea (63), Armenia (46), Vietnam (42), the Maldives (40), Moldova (39), Angola (33) and Uzbekistan (31).

Russian Corruption

Corruption, conflict, and security are profoundly intertwined, says Transparency International.  The misuse, embezzlement or theft of public funds can deprive the very institutions in charge of protecting citizens, enforcing the rule of law and guarding the peace of the resources they need to fulfill that mandate, it says. Criminal and terrorist groups are often aided by the complicity of corrupt public officials, law enforcement authorities, judges and politicians, which allows them to thrive and operate with impunity.

The Russian invasion of Ukraine in February 2022 was a stark reminder of the threat that corruption and the absence of government accountability pose for global peace and security: kleptocrats in Russia (28) have amassed great fortunes by pledging loyalty to President Vladimir Putin in exchange for profitable government contracts and protection of their economic interests. The absence of any checks on Putin’s power allowed him to pursue his geopolitical ambitions with impunity. According to TI, this attack destabilized the European continent, threatening democracy and killing tens of thousands.

After decades of conflict, South Sudan (13) is in a major humanitarian crisis with more than half of the population facing acute food insecurity—and corruption is exacerbating the situation, notes the bribery watchdog. A Sentry report from last year revealed that a massive fraud scheme by a network of corrupt politicians with ties to the president’s family siphoned off aid for food, fuel and medicine.

“The good news is that leaders can fight corruption and promote peace all at once,” says Daniel Eriksson, Chief Executive Officer of Transparency International. “Governments must open up space to include the public in decision-making – from activists and business owners to marginalized communities and young people. In democratic societies, the people can raise their voices to help root out corruption and demand a safer world for us all.” 

Joseph McCafferty is editor & publisher of Compliance Chief 360°

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