USAA Whistleblower Claims AML Sanctions Against Company “Are Just the Tip of the Iceberg”

USAA Whistleblower

According to a former compliance officer, officials at USAA “intentionally” hid illegal practices for U.S. regulators for years despite concerns raised internally by compliance staff, Compliance Week reports. The whistleblower claims that anti-money laundering sanctions levied against the bank earlier this year “are just the tip of the iceberg.”

Lenn Ferrer, a former compliance officer at USAA Federal Savings Bank, a wholly-owned subsidiary of USAA, blew the whistle on USAA’s compliance shortcomings to federal regulators in March 2020. The same day Ferrer blew the whistle, he was fired. According to Compliance Week, USAA claims Ferrer’s termination was for “creat[ing] a toxic employment atmosphere by engaging in threatening and inappropriate conduct towards coworkers.”

On March 17, 2022, the U.S. Treasury Department’s Financial Crime Enforcement Network (FinCEN) announced a $140 million civil money penalty against USAA Federal Savings Bank for willful violations of the Bank Secrecy Act (BSA). According to FinCEN, USAA “admitted that it willfully failed to implement and maintain an anti‑money laundering (AML) program that met the minimum requirements of the BSA from at least January 2016 through April 2021,” and “also admitted that it willfully failed to accurately and timely report thousands of suspicious transactions to FinCEN involving suspicious financial activity by its customers, including customers using personal accounts for apparent criminal activity.”

That same day, the Office of the Comptroller of the Currency (OCC) announced a $60 million civil money penalty against USAA based on the same AML violations. In October 2020, the OCC assessed an $85 million penalty against the bank “based on the bank’s failure to implement and maintain an effective compliance risk management program and an effective information technology risk governance program.”

“These fines are just the tip of the iceberg,” Ferrer told Compliance Week. “They (USAA) have been actively lying to regulators for years.”

According to Compliance Week, Ferrer’s allegations include “unreported violations of the Military Lending Act (MLA), internal warnings that went ignored, and deficiencies in its compliance controls.” Ferrer also reportedly claims that the orders against USAA to date “don’t begin to scratch the surface,” because they do not touch upon the mortgage fraud USAA was allegedly engaging in. “‘Their entire mortgage system was a fraud,’ Ferrer said in internal communications with USAA in February 2020. ‘We spent $200 million on a mortgage system that didn’t work,’” Compliance Week reports.

Ferrer also alleged widespread violations of the Military Lending Act (MLA), an act which affords special protections to active duty servicemembers and their dependents to prevent predatory lending practices. The OCC’s 2020 penalty against USAA cited an unspecified number of violations of the MLA. According to Compliance Week, “Ferrer told the OCC seven months earlier a consulting firm commissioned by the bank discovered an estimated 400,000 violations of the MLA as part of an OCC-mandated lookback.”

Ferrer states he “notified USAA executives on two different occasions of what he characterized as ‘predatory and potentially criminal practices against members of the military’ being committed by USAA Bank as it concerned ‘numerous violations of law,’” Compliance Week reports. Ferrer recounts the lack of action by USAA in response to his allegations. According to Compliance Week, Ferrer said: “‘They didn’t have an investigator contact me. They did nothing and allowed the illegal conduct to continue.’”

Under the Anti-Money Laundering Act of 2020, whistleblowers who report AML violations to FinCEN can qualify for monetary awards. However, whistleblowers warn that loopholes in the law will undermine the whistleblower award program. Thus, advocates are calling for the passage of reform bills introduced in both the U.S. Senate and House of Representatives.


​Whistleblower: USAA ‘actively lying to regulators for years’ regarding violations of law | Article | Compliance Week

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