Attorney General Holder Vows Justice Department Will Continue to Look at Banks That Help Payment Processors Carry out Consumer Scams, Says More Cases to Be Resolved Soon

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Attorney General Eric Holder on Monday said that the Justice Department will continue to investigate financial institutions that knowingly facilitate consumer scams, or that willfully look the other way in processing such fraudulent transactions. He acknowledged that multiple investigations were ongoing in this area, and said he expected several of those cases to be resolved in the coming months.

The department resolved the first such case in April, when Four Oaks of Bank of North Carolina agreed to pay penalties and a forfeiture for knowingly processing fraudulent transactions on behalf of a pyramid scheme. The Attorney General said the department is conducting a series of similar investigations involving allegations of banks enabling third-party payment processors to “siphon billions of dollars from consumers’ bank accounts in exchange for significant fees.”

“In the months ahead, we expect to resolve other investigations involving financial institutions that chose to process transactions even though they knew the transactions were fraudulent, or willfully ignored clear evidence of fraud,” Holder added.

A transcript of the Attorney General’s video message appears below:

“The Justice Department has made it a priority to fight consumer fraud of all kinds, from lottery scams to fake business opportunities to telemarketing fraud targeting Spanish-speaking customers.  All too often, scammers and fraudulent vendors attempt to prey on vulnerable consumers by using sophisticated systems to commit crimes.  But these fraudsters often can’t act alone.  In many cases, they need access to the banking system to pilfer money from their victims.  They frequently use third-party payment processers as intermediaries to route payments through financial institutions.  And in some cases, these financial institutions – rather than working diligently to protect customers’ hard-earned savings – have knowingly facilitated fraud against their customers or consciously chosen to look the other way.

“We at the Justice Department are determined to stop these illegal and unacceptable practices. While we will not target businesses operating within the bounds of the law, and we have no interest in pursuing or discouraging lawful conduct, our Consumer Protection Branch in the Civil Division is leading a range of investigations into banks that illegally enable businesses to siphon billions of dollars from consumers’ bank accounts in exchange for significant fees.

“In April, for example, the Department of Justice reached a settlement with Four Oaks Bank of North Carolina.  This institution permitted a third-party payment processor, which the bank knew was processing transactions reported as fraudulent, to originate $2.4 billion in debit transactions in exchange for over $850,000 in fees paid to the bank.  As a result of our investigation, a federal court has entered an order requiring Four Oaks to pay penalties and forfeiture totaling more than a million dollars and to implement reforms that will prevent this kind of rampant fraud in the future.

“In North Carolina and elsewhere, the Justice Department’s efforts are sending a clear message that such activities are irresponsible.  And they will not be tolerated.  In the months ahead, we expect to resolve other investigations involving financial institutions that chose to process transactions even though they knew the transactions were fraudulent, or willfully ignored clear evidence of fraud.

“The goal of these investigations is quite simple: to protect consumers from scam artists and collaborating institutions – in every circumstance and industry.  In the days ahead, the Justice Department will keep moving forward – guided by the facts and the law – to eliminate fraud targeting consumers while mitigating any impact on institutions not under investigation.  We must enforce the law against both the fraudsters who prey on consumers and the financial institutions who choose to allow these crimes to occur.  When we uncover evidence that financial institutions are knowingly assisting fraudsters, deliberately ignoring evidence of fraud, or intentionally disregarding obligations under federal law – we will not hesitate to act.  We will hold them accountable.  And we will never waver in our determination to protect honest, hardworking Americans from those who put their financial security in peril.”

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