Superintendent Adrienne A. Harris Announces $15 Million Penalty On Metropolitan Commercial Bank For Compliance Deficiencies In Third-Party Debit Card Program
DFS Investigation Finds MCB Failed to Properly Oversee Program, Resulting in Fraud Actors Diverting Critical Pandemic Unemployment Benefits
Superintendent of Financial Services Adrienne A. Harris announced today that Metropolitan Commercial Bank (“MCB” or the “Bank”) has agreed to pay $15 million in penalties pursuant to a Consent Order entered into with the New York State Department of Financial Services (“DFS” or the “Department”). The Consent Order resolves the Department’s investigation into the Bank’s oversight of its MovoCash Digital Prepaid Visa Card Program, which found that the Bank failed to maintain an effective and compliant anti-money laundering program and conducted its banking business in an unsafe and unsound manner.
"During the pandemic, scammers used sophisticated tactics to take advantage of vulnerable New Yorkers at a time when institutions should have been most vigilant," said Superintendent Harris. “MCB failed to prevent a massive, ongoing fraud in the MovoCash prepaid card program, allowing bad actors to abuse the financial system.”
The Department coordinated this investigation with the Board of Governors of the Federal Reserve System and the Federal Reserve Bank of New York which have reached a separate settlement with the Bank.
As the sponsoring bank for the MovoCash cards, MCB was responsible for ensuring that the program complied with applicable laws, including maintenance of an effective Customer Identification Program. The Department’s investigation found that weak controls at MovoCash, and weak oversight by MCB, enabled fraud actors to exploit the program.
As early as January 2020, fraud actors were able to open MovoCash card accounts with fraudulently obtained personal identifying information. These fraudulent accounts were then used to misdirect direct deposit payroll payments and government benefits to the fraud actors. The fraud worsened in late March 2020 with the passage of the CARES Act, which expanded unemployment insurance for millions of Americans. As a result of the readily available benefits, the Bank observed a surge of fraudulent MovoCash account openings, and after failing to remedy problem, allowed new MovoCash accounts to be opened. This inaction allowed the fraud to increase exponentially over the next few months and facilitated more than $300 million in pandemic unemployment benefits to be misdirected to the MovoCash accounts of fraud actors.
Read the MCB consent order.