On October 19, 2023, the Federal Reserve Board issued an enforcement action and fined Metropolitan Commercial Bank, of New York, New York, approximately $14.5 million for violations of customer identification rules and for deficient third-party risk management practices relating to the bank's issuance of prepaid card accounts. The Board conducted an investigation of MCB’s issuance of general purpose reloadable prepaid cards with MovoCash, Inc., a former third-party program manager for MCB’s Global Payments Group, that identified deficiencies in the Bank’s third-party risk management and compliance with the Customer Identification Program under BSA.
From April through July 2020, MCB received multiple reports indicating widespread fraud related to the Movo program and continued to issue Movo Accounts to applicants for whom the Bank did not have a reasonable belief that it knew their true identity. The Board found that MCB’s actions to identify and block or close fraudulent Accounts were ineffective, which allowed illicit actors using stolen identities obtained from unknown sources to use the fraudulent Movo Accounts to collect more than $300 million in illegally obtained state unemployment insurance benefits.
The Board is requiring Metropolitan to improve its customer identification, customer due diligence, and third-party risk management programs. In addition, the Board's action is being taken in conjunction with an action by the New York Department of Financial Services. The penalties announced by the Board and the Department of Financial Services total approximately $30 million.
The FRB’s press release can be found here.
The order can be found here.
