$300 Million in Fraud, $30 Million Penalty

White-collar crime pays quite nicely

Andy Spears


Photo by Nimble Made on Unsplash

The most “successful” thieves wear a shirt and tie, the saying goes.

Or, I think that’s a saying of some sort.

Anyway, Jason Mikula at Fintech Business Weekly has a story of a bank facilitating some $300 million in fraud. The penalty? Just 10% — $30 million.

The case involves lax oversight by Metropolitan Commercial Bank and one-time prepaid debit card issuer MovoCash.

Here’s more:

The Fed and NYDFS found that MCB’s BSA/AML and TPRM failures enabled bad actors to channel some $300 million of illegally obtained state unemployment benefits through MCB and MovoCash. Both MCB and MovoCash benefited from the fraud in the form of interchange and transaction fees.

The penalty assessed for MCB’s role? $30 million.

While MCB knew or had reason to know fraud was occurring as early as January 2020, they failed to act for nearly 7 months. As the Federal Reserve Board notes:

On July 6, 2020, the Bank was informed that at least 60,000–80,000 fraudulent MovoCash accounts were opened each week, and at least $2 million was being taken out of the system through ACH card-to-bank transactions per day.

Each of these transactions was earning cash for MCB.

MovoCash is no longer in business. MCB will pay the penalty and go on about its business. Sure, they may use some additional caution when dealing with prepaid debit card issuers, but the bottom line is this is not much damage to their bottom line.

Plus, the fraud facilitators were all wearing white collars, so none of them will see the inside of a jail cell. Nor will they be personally liable for the crimes they knew or reasonably should have known were happening (and were padding their bonus stats).




Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .