With Increasing Internal Fraud Cases, Banks Require Stricter, Not Looser, Oversight
Banks generally aren't thrilled about heavy regulation. Who can blame them? Complying with rules requires time, effort, and money. However, sometimes regulations emerge due to companies operating outside of expectations. This is reminiscent of lawyers crafting contracts with incredibly restrictive language to prevent future mishaps.
Take, for instance, the indictment of a TD Bank employee by the Manhattan District Attorney's office. According to the allegations, this individual, from the bank's anti-money laundering department, gained access to customers' personal info and directed people on a Telegram channel to open bank accounts in those names, deposit checks, and then pilfer the funds. This scandal, a part of a broader investigation that charged five others in a check fraud scheme totaling nearly half a million dollars, was allegedly not an isolated case, as suggested by a Bloomberg report.
The report paints a picture of a pattern of data theft in banks across the country. While public attention often focuses on high-profile scandals, it often neglects lower-paid employees who sell this information. Banks argue that it's primarily the customers' responsibility to avoid falling victim to such schemes. However, it's the banks that control the systems and grant permission for data access. They are also the entities responsible for implementing measures to prevent data theft – something customers can't accomplish on their own.
In light of such concerns, the need for accountability and regulation becomes apparent. Not that banks always welcome more regulation. Take, for example, Wells Fargo, which was charged with extensive fraud in unauthorized customer accounts in 2016, as reported by NBC News. Thousands of employees opened an estimated 2 million accounts without permission. Then, in 2021, the FBI and the Office of the U.S. Attorney for the Southern District of New York filed and settled a civil suit against Wells Fargo. The suit claimed the bank defrauded over 700 customers by charging higher fees than promised for currency trading, also known as foreign exchange (FX).
In a recent development, the Consumer Financial Protection Bureau sued Capital One for alleged deception. The bureau alleged that Capital One misled customers about the interest rates offered on savings accounts, promising high rates but actually freezing them when national rates rose, only to switch to a lesser-paying account.
Despite a handful of examples like these, the Trump administration seems to prioritize less regulation rather than more. Historically, deficiencies in bank regulation have surfaced, as evidenced by past incidents. However, the question remains: why do regulatory bodies often intervene after problems escalate rather than preventing them from arising in the first place? Compliance should be an ongoing process, but often, it's overlooked until it's too late.
The TD Bank employee's indictment for directing customers to open accounts and defraud funds highlights an overzealous individual abusing bank permissions. This incident, part of a larger check fraud scheme, is not an isolated case according to a Bloomberg report, suggesting a pattern of data theft in the banking sector. Regulations are needed to hold banks accountable, as demonstrated by Wells Fargo's chargers for unauthorized customer accounts and foreign exchange fee deceptions.
