Guilty As Charged

US Bank has been found guilty by federal regulators of two felony violations of the Bank Secrecy Act and will pay a total of $613 million (including $528 million in a deferred prosecution agreement with the U.S. attorney in Manhattan) in fines for ties to facilitating money laundering.

The lawsuit centers around Scott Tucker, a payday lending profiteer who sent more than 2 billion in fake US Bank accounts.  Bank employees missed all of the warning signs associated with his accounts, and then hid evidence from regulators about the mishaps.

Impact on Manufactured Spending

Manufactured spending to accumulate points en masse isn’t money laundering, but the practice at US Bank could be threatened in the near future.  I know some people engaged in upper levels of manufactured spending that have already been shutdown at US Bank, so the bank has exposure to MS.  Those shutdowns seem to be mostly linked with deposits (vs. spend), and have also closed other accounts like investments and credit cards.  However, US Bank is also servicing the Fidelity 2% cash back card and there have been some spend related shutdowns on that card too.

US Bank says it will reform its compliance and monitoring program, but it’s unclear what effect on any that might have on the manufactured spend aspect of the points and miles hobby.  Improving detection software, greater attention to money orders, and deposit/spend monitoring are all very real possibilities.  If done wisely, manufactured spenders will have separate checking accounts from their rewards credit cards so if one is shutdown, the other doesn’t go with it.