Wells Fargo's Anti-Money Laundering Compliance: Analysts See Minimal Impact on Growth Despite Regulatory Hurdles

Wells Fargo & Company WFC shares are trading higher on Friday. On Thursday, the U.S. Office of the Comptroller of the Currency (OCC) entered into a formal agreement with the company as related to its anti-money laundering (AML) and sanctions risk management practices.

Wells Fargo issued a statement Thursday announcing a new agreement, which will require enhancements to the bank’s AML and sanctions risk management practices, obtaining the OCC’s acceptance of Wells Fargo’s program for assessing the AML and sanctions risks of new offerings and providing notice to the OCC before expanding certain of those offerings. 

Goldman Sachs analysts Richard Ramsden and James Yaro write that it appears that Wells Fargo has been aware of the issues related to this enforcement action for some time, so they don’t expect it to affect their 2024 expense outlook significantly.

Based on past cases, if Wells Fargo resolves the control deficiencies within the OCC’s timeline, it’s unlikely to escalate to a more serious consent order, which could involve civil penalties and stricter business limitations, per the analysts.

Analysts say that while the agreement restricts WFC from expanding into products or services with medium or high BSA/AML risk without approval, they don’t foresee a material impact on their near-term growth.

RBC Capital Markets analyst Gerard Cassidy writes that although this news is unexpected and AML issues are serious, often involving fines, lengthy resolutions, and high costs, they don’t believe this agreement will affect the chances of lifting the Federal Reserve’s 2018 Cease and Desist (C&D) order and asset cap.

The C&D order is focused on WFC’s consumer banking issues, while today’s agreement addresses separate AML concerns, adds the analyst.

Last month, Wells Fargo planned to sell its non-agency third-party commercial mortgage servicing segment to Trimont, closing in early 2025.

Investors can gain access to the stock via First Trust Nasdaq Bank ETF FTXO and Invesco KBW Bank ETF KBWB.

Price Action: WFC shares are up 1.48% at $52.33 at the last check Friday.

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