The US state of New York has imposed a penalty of $65m on Wells Fargo & Company for its cross-selling business model, sales practices, and publicly reported cross-sell metrics.
The bank reached the settlement with New York Attorney General Barbara Underwood.
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Underwood said: “The misconduct at Wells Fargo was widespread across the bank and at every level of management – impacting both customers and investors who were misled.
“State securities laws are vital to protecting the hard-earned savings of working families and Main Street investors from financial fraud, and my office will continue to do what’s necessary to protect the public and the integrity of our markets.”
During the investigation, the regulators found that despite being aware of widespread fraud committed by its employees in 2013, the bank did nothing to disclose its knowledge of systemic problems pervading its sales practices.
The regulator cited an email in from June 2011 in which a member of the bank’s incentive compensation team said: “I’ve asked bankers … why people cheat … it’s because their manager tells them they’ll be fired if they don’t hit their minimums.”
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By GlobalDataDuring a Congressional testimony, Wells Fargo former CEO said that he came to know about the widespread fraud by Wells Fargo employees in 2013. When the truth was revealed, New York investors lost millions of dollars.
The regulators further criticised the bank for setting strict and unrealistic sales goals, which forced staff of Wells Fargo’s Community Bank division to start fraudulent sales practices, including the opening of millions of fake deposit and credit card accounts without customers’ knowledge.
Employees who met these targets were offered promotions and bonuses and those who did not meet the sales targets faced continuous pressure and were even fired.
Commenting on the settlement, the bank said: “Wells Fargo did not admit liability, and we believe that putting this matter behind us is in the best interest of all of our stakeholders, including customers. The settlement costs have been previously accrued.”
