Wells Fargo, the world’s fourth-largest bank by market capitalization is in hot water. It has been whacked with a penalty of $3 Billion for executing a toxic sales culture over 15 long years. Believe it or not, Wells Fargo has been following illegal practices that have harmed its customers.
According to the U.S. Department of Justice (DOJ), the bank was heavily misusing sensitive customer information. From 2002 to 2016, the bank had been pressurizing its teams to conduct fraudulent sales practices. All with a motive to meet unrealistic sales targets. In the process, the employees, created millions of fake accounts, forged customer signatures and harmed the credit ratings of their customers.
On 21 February, DOJ announced that Wells Fargo has consented to pay $3 billion for its misdeeds. Moreover, it will participate in conducting criminal and civil investigations of the fake-account scandal. However, this penalty does not protect current and former Wells Fargo employees from legal prosecution.
As per the settlement issued by the SEC and Justice Department, the top executives were aware of the unethical practices since 2002.
More regulatory headache for Wells Fargo
Wells Fargo CEO Charlie Scharf, agreed the wrongdoings are completely inconsistent with the core value of the company. The bank hired Scharf in September 2019 to improve the image of the bank.
But the SEC and DOJ settlement was not the only headache to be faced by the bank. It is yet to settle the allegations by the Labor Department. According to the Labor Department, the bank has committed wage theft and fired the employees who raised alarm against the unethical sales practice.
In early 2018, Federal Reserve imposed sanctions on Wells Fargo that prevents the bank from growing its assets beyond $2 trillion. And according to analysts, it might these sanctions might remain intact till 2022.
The Out-turn of Centralization
Wells-Fargo is not the only traditional bank to have faced such penalties. Since the financial crises of 2008, leading banks have paid $243 billion as a penalty for abusing client data. Surprisingly, Bank of America leads the pack with a penalty amount of $76 billion. The other prominent banks that faced penalties were JPMorgan Chase, Citigroup, Deutsche Bank and more.
Taken together, traditional banks are harming their customers to satiate their greed for money and power. When the banks of the repute of Wells Fargo conduct identity thefts and falsify bank records, the customer’s skepticism towards the centralized banking system flares up.
Thus, the practice of putting the hard-earned money into someone else’s control is questioned. And this is where the concept of decentralized finance sounds quite promising.
It seems Wells Fargo is also relying on blockchain to prevent such mishaps in the future. Recently, it invested a sum of $5 million in blockchain project Elliptic. This is a major shift from their earlier stance against cryptocurrencies.