For an example of how corrupt management and poor internal controls can undo a financial institution, look to West Virginia's now-defunct First National Bank of Keystone. Nearly a decade before the subprime mortgage-backed securities crisis of 2007-2008, U.S. regulators uncovered a $500 million fraud at the bank made possible by a toxic mix of poor due diligence, a cowed staff and inadequate oversight. Keystone, which bundled and sold subprime loans while covering up its own financial losses, was previously seen as one of the nation's top-earning banks of the 1990s. The scheme was enabled by the fact that "time is...
If March's record penalty against Wells Fargo & Co. has reminded compliance departments of the bite of anti-money laundering regulatory fines, it has also been a reminder of something else. With acquisitions come problems.
Keeping tabs on employees who might abuse sensitive information has long been a standard practice among financial institutions. But as communication applications have evolved, what compliance officers need to look for, and at, has changed as well.
Grant Thornton failed to verify First National Bank of Keystone's claims or conduct appropriate tests when reviewing its 1998 financial statements, the OCC said in a statement. The Chicago-based accounting firm plans to appeal the ruling.