The Federal Reserve Board has taken enforcement action against Metropolitan Commercial Bank of New York, fining them approximately $14.5 million. This action is due to violations of customer identification rules and inadequate third-party risk management practices related to the issuance of prepaid card accounts.
In 2020, Metropolitan Commercial Bank opened prepaid card accounts for individuals involved in illicit activities who then used these accounts to collect unlawfully-obtained state unemployment insurance benefits. The bank had not established proper procedures to verify the true identity of applicants when opening prepaid card accounts through a third-party program manager, resulting in a breach of the customer identification rules under the Bank Secrecy Act.
As a response to these violations, the Federal Reserve Board is mandating that Metropolitan Commercial Bank enhances its customer identification, customer due diligence, and third-party risk management programs.
This enforcement action coincides with a similar action taken by the New York Department of Financial Services, the state regulator overseeing Metropolitan Commercial Bank. The combined penalties from both authorities amount to approximately $30 million.
Read the full order here.
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