The conclusion of an internal review conducted by the Office of the Comptroller of the Currency, in its simplest terms: regulators dropped the ball when reviewing potential malfeasance at Wells Fargo.

Among the regrettable oversights documented in the April 20 report was a failure to adequately address “red flags” and virtually ignoring the substance of more than 700 whistleblower complaints.

“The actions of Wells Fargo highlight that the OCC must continue our efforts to improve and refine the agency’s supervisory program, to sharpen our early warning process, and to enhance our supervisory capabilities,” the report says.

Earlier this year, the OCC, City of Los Angeles, and the Consumer Financial Protection Bureau announced that Wells Fargo Bank, a subsidiary of Wells Fargo & Company, was fined $185 million.

Wells Fargo had compensation incentive programs in place for employees that encouraged them to sign up existing clients for deposit accounts, credit cards, debit cards, and online banking. Spurred by sales targets and these compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers.

In response to the scandal, the bank fired 5,300 employees. The bank’s CEO and a top executive also resigned, and surrendered millions of dollars in compensation.

Among the findings in the OCC report is that the agency “did not take timely and effective supervisory actions after the bank and the [the regulator] identified significant issues with complaint management. Issues with sales practices were identified in the bank’s Audit Committee reports as early as 2005 and in OCC core assessment conclusions since at least 2010. Indications of “untimly and ineffective supervision of complaints and whistleblower cases,” however, were not effectively dealt with. The Wells Fargo team’s supervision of consumer complaints, employee complaints received through the banks EthicsLine, and whistleblower cases “did not ensure examiners evaluated root causes (aggressive incentives, weak preventative controls) so supervisory strategies and corrective actions could have been designed to correct systemic, inappropriate practices that were the root cause.”

The supervisory record indicated several missed opportunities to perform comprehensive analyses to take more timely action beginning in 2010. There were also instances where the Wells Fargo team: focused too heavily on bank processes versus what those processes were actually reporting; reached conclusions without testing or determining the root causes of complaints despite the existence of red flags; failed to follow-up on significant complaint management and sales practices issues although they were included in successive strategies; and failed to document resolution of whistleblower cases.

“Examiners asked Senior Executive Vice President [Carrie] Tolstedt about the 700 cases of WB complaints related to gaming of incentive plans,” the report recounts. “Ms. Tolstedt responded that the primary reason for the high number of complaints is that the culture encourages valid complaints which are then investigated and properly addressed. She also said the incentive programs are capped n the stores at 10 percent to 20 percent of total cash compensation to keep motivation in check.”

The Wells Fargo team “missed opportunities to address concerns with unsafe or unsound sales practices in the Community Banking division earlier,” the regulator found. “As discussed previously, the OCC identified concerns with aggressive sales practices as early as 2010 and examiners concluded that the OCC was unaware of risk assessments or controls related to these activities.”

The report documents a 2010 strategic initiative at the bank, “Going for Gr-Eight,” which promoted doubling the number of products per customer to eight.

“The aggressive sales concern was a factor contributing to the operational risk rating,” it says. “Despite ongoing red flags from both OCC and Wells Fargo internal whistleblower cases, as well as internal EthicsLine complaints regarding sales integrity violations and gaming sales incentive programs, [OCC personnel] found no evidence that supervisory activities included in-depth review and testing of monitoring systems and controls over this area, at least from 2011 through 2014.”

Identified issued on the part of the OCC included: unclear supervisory records; lack of documented analysis of bank source documents (iEthicsLine quarterly audit reports); and difficulty tracking strategy execution (Compensation Audit reviews).

Among the lessons learned, as documented in the report:

There is a need to improve collaboration processes between teams on multi-discipline issues, such as the inappropriate sales practices which were reviewed by operational risk, enterprise risk management, and compliance risk.

The OCC should ensure earlier collaboration with appropriate units outside of the line of business (legal, policy, etc.) when issues are identified.

The OCC must make sure issues or concerns are followed through to effective corrective action rather than incorporated into higher-level supervisory activities or processes that delay corrective actions.

The agency should implementing a process to ensure periodic, comprehensive analysis of complaints and whistleblower cases, which includes testing, analysis of systemic root causes, and appropriate follow-up.

Processes should evaluate systemic root causes of reputation risk, especially when the quantity of risk is moderate and increasing or high, and take appropriate supervisory action.

The OCC should stress the importance of ensuring a well-developed whistleblower protocols in place to research each individual case, document resolution of those cases, and analyze potential systemic risk.

The agency would have benefitted from well-developed whistleblower protocols by having an earlier indication of potential reputation or supervision risk for the agency.

The OCC should develop an enterprise-wide whistleblower process and updating external facing interfaces (, to inform the public, or other governmental agencies, how to communicate whistleblower information to the OCC.

The OCC says it may also review its whistleblower process for collaborating with other regulators, including the CFPB.