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Financial Services Law Insights and Observations

National bank to pay $37 million for alleged foreign exchange violations

Courts DOJ Whistleblower FIRREA Fraud Foreign Exchange Trading Of Interest to Non-US Persons


On September 27, a proposed settlement was filed in the U.S. District Court for the Southern District of New York resolving allegations that a national bank (defendant) allegedly defrauded nearly 800 commercial customers by charging higher prices on foreign exchange (FX) transactions despite having fixed-pricing agreements. According to the complaint, from 2010 to 2017, the defendant allegedly defrauded customers who utilized its FX services, which violated the mail fraud, wire fraud, and bank fraud statutes of the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), by: (i) falsely representing that the defendant would charge fixed FX spreads or sales margins on the customers’ FX transactions; (ii) financially incentivizing the FX sales specialists to overcharge while failing to certify that FX sales specialists comply with fixed-pricing agreements; and (iii) systematically charging “higher [FX] spreads or sales margins than [the bank] represented it would charge and/or was charging in fixed-pricing agreements or otherwise, while concealing the overcharges from the Customers.” Under the terms of the proposed settlement, the defendant must pay nearly $35.3 million plus interest, while an additional $2 million payment plus interest is subject to forfeiture to the U.S. The proposed settlement notes that the defendant paid $35.3 million in restitution to commercial customers who utilized the bank’s FX services. According to the order, the whistleblower who filed a declaration in 2016 with the U.S. under the Financial Institutions Anti-Fraud Enforcement Act will receive $1.6 million of the civil penalty. The DOJ sent a letter informing the court “that the United States and [the bank] have entered into a proposed Stipulation and Order of Settlement and Dismissal (the ‘Settlement’) resolving this action.”