Metropolitan Commercial Bank (MCB) announced its agreement to pay a fine of $15 million after the completion of an investigation conducted by the New York State Department of Financial Services (DFS).
Financial Services Superintendent Adrienne A. Harris stated that the specified lender failed to create a system of effective control over the implementation of its Visa MovoCash digital prepaid card program. The lack of acceptable quality of work on the part of the bank within the framework of the mentioned line of activity was the reason that fraudsters gained access to unemployment benefits paid due to the coronavirus pandemic. The relevant information is contained in the DFS press release, which was published last Thursday, October 19.
As part of the investigation, the regional regulator found that the financial institution did not support an effective and industry-compliant anti-money laundering program. It also turned out that the bank conducted business based on an unsafe concept of activity.
Adrienne A. Harris said that during the coronavirus pandemic, fraudsters used sophisticated deception techniques to gain access to the funds of vulnerable New Yorkers. The Superintendent noted that against the background of this threat, financial institutions had to show maximum vigilance. Adrienne A. Harris also stated that MCB, in the current situation, was unable to effectively resist massive fraud under the MovoCash prepaid card program.
The DFS press release notes that the mentioned lender, as the sponsor bank of these cards, should be responsible for ensuring compliance with the laws, including maintaining an effective customer identification program. But the MCB’s insufficient actions have created a kind of window of opportunity for scammers.
The criminal activity began in January 2020, when fraudsters opened MovoCash card accounts using illegally obtained confidential information intended for passing the identification procedure. These accounts were used to redirect direct deposit payments of payroll and state benefits to participants of the fraudulent plan.
The adoption of the CARES Act at the end of March 2020, which expanded unemployment insurance, aggravated the situation. During this period, MCB recorded an increase in the opening of MovoCash accounts by scammers but did not counteract this. Over the next few months, more than $300 million in unemployment benefits ended up in the accounts of fraudsters.
As we have reported earlier, Fed Fines Deutsche Bank.