U.S. probing 15 banks, payment processors for fraud

WASHINGTON Thu May 29, 2014 5:27pm EDT

The Department of Justice (DOJ) logo is pictured on a wall after a news conference in New York December 5, 2013.     REUTERS/Carlo Allegri

The Department of Justice (DOJ) logo is pictured on a wall after a news conference in New York December 5, 2013.

Credit: Reuters/Carlo Allegri

WASHINGTON (Reuters) - U.S. prosecutors have opened criminal and civil probes into at least 15 banks and payment processors as part of a wide-ranging consumer fraud investigation, according to documents released on Thursday by a congressional committee.

The Justice Department's investigation, known as "Operation Choke Point," is more than a year old and aims to crack down on fraud by going after firms that handle and move money for various suspect businesses.

According to documents released on Thursday by the House of Representatives' Oversight Committee, the DOJ had criminal probes open of four payment processors, one bank and several officials as of November 2013.

The department had separate investigations into at least 10 banks and payment processors under a civil fraud law, according to a memo from a DOJ official that was included in the documents.

Maame Ewusi-Mensah Frimpong, an official in the DOJ's civil division, wrote in the memo that the probe had already caused some banks to stop processing payments for entities the firms believed could be involved in fraud against consumers.

"We believe we already have denied fraudulent merchants access to tens, if not hundreds, of millions of dollars from consumers' bank accounts, and that amount will increase daily and indefinitely," Frimpong said in the November memo.

House Republicans, including oversight panel leader Darrell Issa, see the investigation differently. They say the DOJ has conducted a shadowy effort to put firms with legal activities out of business by pressuring banks to stop working with them.

"Operation Choke Point is the Justice Department's newest abuse of power," Issa said in a statement released with the documents. "If the administration believes some businesses should be out of business, they should prosecute them before a judge and jury."

DOJ spokeswoman Emily Pierce said in an email that the department only investigates firms that break federal laws.

"When financial institutions choose to process transactions, even though they know the transactions are fraudulent or are willfully ignorant of that fact, they are breaking federal law and we will not hesitate to hold them accountable," she said.

(Reporting by Aruna Viswanatha and Emily Stephenson; editing by Susan Heavey and Matthew Lewis)

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Comments (11)
“…a shadowy effort to put firms with legal activities out of business by pressuring banks to stop working with them.” The banks have been told that the black-listed businesses include anyone who takes pay-pal, or sells guns in a store or online. If they continue to do business with those entities, they will be subject to the audit. As a result, many banks dropped gun stores and online merchants as customers, regardless of their standing as a customer to avoid the audit. It would seem these banks were willing to stand up in principle to the government. This administration will do anything it can to infringe on the right to bear arms, including buying up all the ammunition and now shutting down the banks who they work through.

May 29, 2014 3:02pm EDT  --  Report as abuse
Hey Aruna, & Emily,
What the heck kind of an article is this ? What companies, how much money is involved ? Over what period of time did the “infractions” occur ?
By payment processors do you mean Loan Servicers such as Hells Cargo Home Mortgage, JP Morgue Chase, S!itibank, Boa & ReconTrust ? (read Repo-Trust). By DOJ I assume you mean “Don’t Offend Jamie” as I have had extensive conversations with the Just-Us Dept. and OCC & they literally use the exact same language as the banks letters to victims of the banks fraud. Do you work for Eric Holder or Reuters ?
Banks continue to violate the Cease & Desist Consent Orders all the Big Bank’s Bored(sic) of Directors signed.
Hell Wells Fargo’s, -Attorney Foreclosure Procedures Manual was revised right after WF Pres. John Stumpf(sic) signed Treasury’s doc.
Here’s a suggestion, after your internship is done, go do some actual research in the actual County Recorders office using the names of the ten highest ranking politicians in any town with a pop. of more then 60,000 people fifty miles from the Dist. of Corruption and get back to me.
Don’t worry you won’t be graded on this, now go get ‘em.

May 29, 2014 3:29pm EDT  --  Report as abuse
tmc wrote:
I have to agree that it is a pretty crappy story. Leaves me wondering who did what. Poor reporting.

May 29, 2014 4:33pm EDT  --  Report as abuse
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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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