Fed: Bank fined $14.5 million for violating BSA’s customer ID rules, deficient third-party risk management practices

The state-chartered, federally insured Metropolitan Commercial Bank (MCB), New York, N.Y., was fined about $14.5 million by the Federal Reserve Board Thursday over findings that it violated Bank Secrecy Act (BSA) customer identification rules and used deficient third-party risk management practices relating to its issuance of prepaid card accounts.

The Fed, in its announcement, said Metropolitan in 2020 opened prepaid card accounts for illicit actors who subsequently used the accounts to collect illegally-obtained state unemployment insurance benefits. The Fed’s order states these actors collected more than $300 million in benefits, of which about $200 million has not been recovered.

The bank opened the prepaid card accounts through a third-party program manager for MCB’s Global Payments Group called Movo Cash without having adequate procedures for verifying each applicant’s true identity, the Fed said. The bank has since ended its relationship with Movo. Meanwhile, the Fed Board’s enforcement order requires MCB to improve its customer identification, customer due diligence, and third-party risk management programs.

The Fed said the board’s action is being taken in conjunction with an action by the New York Department of Financial Services, the state supervisor of Metropolitan. The penalties announced by the Fed Board and the state supervisor total approximately $30 million, it said.

Federal Reserve Board issues enforcement action and fines Metropolitan Commercial Bank approximately $14.5 million for violations of customer identification rules and for deficient third-party risk management practices