In a recent enforcement action, the Federal Reserve Board has fined Metropolitan Commercial Bank of New York approximately $14.5 million for infringing customer identification regulations and displaying inadequate third-party risk management practices in the issuance of prepaid card accounts, as per the source by Federal Reserve.
Metropolitan Bank Prepaid Card
During the year 2020, Metropolitan Commercial Bank issued prepaid card accounts to illicit actors who later exploited these accounts to receive unlawfully obtained state unemployment insurance benefits. The bank’s failure to implement sufficient applicant identity verification procedures when opening prepaid card accounts through a third-party program manager resulted in violations of the Bank Secrecy Act’s customer identification regulations. In response to these breaches, the Board has mandated that Metropolitan Bank enhance its customer identification, customer due diligence, and third-party risk management programs.
It’s important to note that the Federal Reserve Board’s actions are in conjunction with a parallel move by the New York Department of Financial Services, the state’s banking regulator responsible for overseeing Metropolitan Bank. The combined penalties imposed by both the Federal Reserve and the Department of Financial Services amount to approximately $30 million.
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