MONEY

Capital One eyed in anti-money-laundering probe

Kevin McCoy
USA TODAY

Here's what's in Capital One Financial's wallet: Federal and state investigators' requests for information about the U.S. banking giant's anti-money-laundering program.

File photo taken in 2012 shows the logo of Capital One Bank at a branch in New York City.

Investigations by the Department of Justice, the Department of the Treasury's Financial Crimes Enforcement Network, and the Manhattan District Attorney's office in New York focus on "certain former check-casher clients" of Capital One's commercial banking business, the company said Thursday in its annual report.

The disclosure reworded information the bank reported in previous Securities and Exchange Commission filings. Investigators have also sought information about the bank's required internal safeguards to prevent money-laundering transactions, Capital One said, adding that it is cooperating with all of the agencies.

Capital One also noted that it is already subject to a 2015 consent order with the Office of the Comptroller of the Currency "concerning regulatory deficiencies" in the bank's anti-money-laundering program.

Shares of Capital One Financial (COF) closed down fractionally at $92.61 in Friday trading.

The banking company's latest disclosure provided no further information about the investigation. However, the OCC consent order found that Capital One had "failed to adopt and implement" an adequate anti-money-laundering compliance program "due to an inadequate system of internal controls and ineffective independent testing."

The bank also failed to file mandatory reports "related to suspicious customer activity," the order said.

Capital One neither admitted nor denied the findings, but consented to the OCC order. The action required the bank to submit a comprehensive anti-money-laundering plan to the regulator, conduct an assessment of money laundering risk with each line of Capital One's business and develop procedures for conducting due diligence checks of bank customers.

The OCC consent order poses a complicating factor in Capital One's October announcement of a 10-year plan to issue co-branded credit cards to customers of Cabela's (CAB), the Nebraska-based specialty retailer of hunting, fishing and other outdoor equipment.

The deal is concurrent with privately-owned Bass Pro Shops' proposed $4.5 billion agreement to buy Cabela's. The Federal Trade Commission requested more information about the acquisition in late December, Cabela's disclosed in a SEC filing.

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During Capital One's fourth-quarter earnings call last month, CEO and President Richard Fairbank told financial analysts the Cabela's deal requires federal Bank Merger Act approval from the OCC. But the bank doesn't expect approval before Oct. 3, the date when parties in either the credit card agreement or the retailer merger could opt to terminate the transactions, he said.

If Capital One withdraws its application for OCC approval or the regulator denies it, Fairbank said the bank would be unable to refile "until after we have completed our work under the AML (anti-money-laundering) consent order."

"We're all in working incredibly hard," said Fairbank. "We're working with Cabela's. We are very committed to this transaction, and we believe this can be a great deal for us and for Cabela's, for Bass Pro."

Follow USA TODAY reporter Kevin McCoy on Twitter: @kmccoynyc