Wall Street Continues Its Crooked Ways
It’s nice to see that two of my favorite Wall Street recidivists are still managing to break the law with relative impunity. Let’s start off with Wells Fargo who had just “uncovered” the fact that a “calculation error” in their software denied hundreds of customers loan modifications they were entitled to and nearly two-thirds of those customers were accordingly forced into bankruptcy.
According to Wells, an internal review of the company’s loan modification system discovered the calculation error. Because of that error, 625 customers were denied modifications and 400 of those denials resulted in foreclosure action by the bank. Wells has apparently set aside $8 million to deal with the resulting claims. I’ll give Wells credit. At least they are cutting down on the number of customers they are apparently ripping off.
Improvement doesn’t seem to be the case over at Trump’s banker of last resort, Deutsche Bank (DB). Less than a year after being fined $700 million for money laundering, an internal study by the bank found that there are still severe problems with the firm’s anti-money laundering (AML) processes. The study showed that absolutely none of the accounts from Russia, Ireland, Spain, Italy and South Africa were processed in accordance with proper AML procedures. That’s right, none. The bank’s internal goal is to have at least 95% of accounts processed correctly.
You might remember that DB was involved in an open and unsophisticated money-laundering scheme that funneled $10 billion out of Russia for Putin’s oligarchs. That scheme, which went on for a full four years from 2011 until 2015, used mirror trades and involved both the Moscow and London offices of DB.
Look, stricter AML requirements have been on the books since the passage of Patriot Act in the wake of 9/11. Those procedures have been largely adopted by the EU. The idea that over a decade and a half later a major bank like DB can not open a single account in countries like Ireland, Spain, and Italy, much less Russia, under proper AML procedures is simply laughable. DB claims that the results indicate that their AML processes are too complex. I rather think that it indicates that the bank doesn’t really care about AML and opens too many accounts with, to be polite, marginal customers.
And since we’re traveling down the road of Wall Street corruption today, it appears that Goldman Sachs is finally under investigation for its part in the massive embezzlement of the 1MDB development fund by the now former Malaysian prime minister and his political cronies. That embezzlement was apparently abetted by the Goldman Sachs banker handling the 1MDB account who used a Goldman Sachs stationery to write an unauthorized letter that allowed the transfer of $3 billion out of the fund to a crony of the Malaysian PM. Goldman raised billions of dollars for the 1MDB fund with then president of Goldman and now former economic adviser to Trump Gary Cohn signing off on a number of these transactions.
The current investigation is focusing on whether other Goldman officials other than the 1MDB banker were aware of and involved in the dubious transfers out of the fund and whether the bank had fully vetted the managers of the fund. To add to the bank’s potential troubles, the Malaysian government is seeking restitution from Goldman for at least a portion of the embezzled funds, indicating they hold the bank at least partly responsible.
