Discover gets FDIC order to bolster controls on money-laundering
Riverwoods-based Discover Financial Services agreed with regulators to bolster its payment systems against money launderers. No financial penalty was imposed.
The Federal Deposit Insurance Corp. told Discover "to correct any unsafe or unsound banking practices and prevent any violations of law or regulation" cited in a Sept. 9 report by the regulator, according to a filing yesterday. The lender consented to the order "without admitting or denying any charges" related to weaknesses in its compliance with the Bank Secrecy Act, according to the filing.
Regulators are pressing the world's biggest lenders to verify that transactions are tied to legitimate business. They're also scrutinizing banks that have made acquisitions to ensure controls are updated to match the new size and complexity of the combined companies. The Federal Reserve has delayed M&T Bank Corp.'s takeover of Hudson City Bancorp Inc. for almost two years while demanding stronger controls.
"Our mutual agreement on the consent order calls for additional enhancements to the programs we have in place in order to meet heightened regulatory requirements," said Jon Drummond, a spokesman for the firm. "Discover is committed to continuously making our compliance program stronger, including our policies, procedures, training and other internal controls designed to mitigate inherent risks in our business."
FDIC Requests
Discover has 120 days to set up a program for tracking anti-money laundering efforts and hire a consultant to assist. The potential costs won't be material, Drummond said.
Measures demanded by the FDIC include periodic scans of Discover's customer database for so-called specially designated nationals. The Treasury Department defines them as people and companies owned, controlled by, or acting on behalf of targeted countries, as well as individuals, groups, and entities such as terrorists and drug traffickers.
The bank isn't aware and hasn't been notified of any instances of actual money laundering, Drummond said. The agreement pertains to Discover's oversight of its monitoring efforts, he said. Discover disclosed in February that regulators notified the company of "certain potential program deficiencies" as part of the FDIC's annual examination.
The firm expanded by offering home loans in 2012 and entered the student lending business the year before. It's not required to disclose the September bank examination report cited in yesterday's filing.