U.S. Bank hit with $613 million penalty related to Scott Tucker banking relationship

The wreckage of Scott Tucker’s payday loan empire has now reached one of the largest North American banks with federal prosecutors announcing criminal charges against U.S. Bank for its handling of the Leawood, Kan., man’s business accounts.

The U.S. Attorney’s Office for the Southern District of New York announced that U.S. Bank will pay $613 million in penalties as punishment for the bank’s lax anti-money laundering programs and regulatory compliance that facilitated Tucker’s illegal payday lending operation.

U.S. Bank had signaled in regulatory filings reported by The Star in January that it expected to pay large penalties for violating the Bank Secrecy Act.

Tucker is in federal prison after his Oct. 13 conviction of charges related to his massive illegal payday lending operation. He was sentenced on Jan. 5 to 16 years and eight months in prison.

“U.S. Bank’s (anti-money laundering) program was highly inadequate,” said U.S. Attorney for the Southern District of New York Geoffrey Berman in a statement. “The Bank operated the program ‘on the cheap’ by restricting headcount and other compliance resources, and then imposed hard caps on the number of transactions subject to AML review in order to create the appearance that the program was operating properly.”

Documents filed in federal court say U.S. Bank willfully failed to report Tucker’s suspicious banking activities, even though the bank had been made aware that his banking practices showed patterns of money laundering.

A U.S. Bank investigator in 2011 took note of news reports about Tucker’s payday lending business and told supervisors “it looks as though Mr. Tucker is quite the slippery individual” and that he “really does hide behind a bunch of shell companies.”

U.S. Bank closed some of the accounts that were set up in the name of the American Indian tribal companies through which Tucker concealed his involvement in the payday lending business, but the bank never reported Tucker’s activities to regulators.

Tucker continued his banking relationship with U.S. Bank, allowing more than $176 million in deposits from his businesses to go into U.S. Bank accounts.

U.S. Bancorp, the parent company of U.S. Bank, agreed to a deferred prosecution agreement for two years during which it is expected to reform its anti-money laundering and Ban Secrecy Act protocols.

“Today’s resolution finalizes legacy matters involving our AML compliance program,” said Andy Cecere, president and CEO, U.S. Bank, in a statement. “We regret and have accepted responsibility for the past deficiencies in our AML program. Our culture of ethics and integrity demands that we do better. One of U.S. Bank’s key priorities is to maintain an exceptional AML program and we are confident in the strength of the program we have in place today.”

The penalty amounts to a tiny dent in U.S. Bank’s earnings. U.S. Bancorp reported net income of $1.569 billion during the three month period that ended on Sept. 30.