Wells Fargo fined $98M for facilitating sanctions violations in Iran, Syria, Sudan

The Federal Reserve Board announced Thursday it fined Wells Fargo $67.8 million for oversight failures, and the Treasury Department’s Office of Foreign Assets Control (OFAC) penalized Wells Fargo Bank $30 million for providing a trade finance platform to a foreign bank, which then used the platform to process 124 apparent prohibited transactions between 2010 and 2015.

Wells Fargo self-reported the apparent violations, according to OFAC, which were categorized as egregious.

The Fed, in its assessment order, said Wells Fargo failed to identify and address the legal and compliance risks associated with the transactions, and that its failure to address the issues constituted an unsafe or unsound practice. The bank shut down the use of the platform in December 2015, when it reported the apparent violations to the Fed and OFAC.

Wells Fargo previously disclosed in May 2022 it was negotiating with federal agencies regarding potential sanctions violations.

Compliance ramifications: In 2008, Wells Fargo merged with Wachovia Bank, which had provided a customized version of its trade finance software platform called “Eximbills” to a foreign bank. The foreign bank used the system to process non-U.S. dollar trade finance instruments outside the U.S. financial system, according to the Fed. Wells Fargo continued providing the software platform under its subsidiary, Wells Fargo Bank, until 2015, the Fed said.

“There is no indication that Wachovia’s or Wells Fargo’s senior management either directed or had actual knowledge” of the use of the system by the foreign bank to engage in transactions with OFAC-sanctioned jurisdictions and persons, according to OFAC, but Wells Fargo’s senior managers “should reasonably have known” the foreign bank was using the system to engage in transactions with sanctioned jurisdictions and persons.

After the merger, Wells Fargo personnel “raised on multiple occasions, including to senior management, the potential sanctions-related risks arising from the trade insourcing relationships it inherited from Wachovia,” OFAC said. But Wells Fargo had no system in place to review the foreign bank’s use of Eximbills for OFAC compliance, according to the regulator. It took nearly seven years, OFAC said, for Wells Fargo to stop the foreign bank from using Eximbills to process these transactions using technology located at a bank branch in Hong Kong and data facility in North Carolina.

Wells Fargo conducted a comprehensive internal investigation into the matter after it reported the violations, OFAC said. The Fed said Wells Fargo “remediated the violations of OFAC regulations related to Eximbills, strengthened firmwide compliance with OFAC regulations, and have fully cooperated with the Board of Governors.”

Wells Fargo response: In an emailed statement, a Wells Fargo spokesperson said the bank “is pleased to resolve this legacy matter involving conduct that ended in 2015, which we voluntarily self-reported and fully cooperated with OFAC and the Federal Reserve Board to address.”