CommerceWest Bank in $4.9M deal with US to settle fraud case

AP News
Posted: Mar 10, 2015 7:18 PM

WASHINGTON (AP) — CommerceWest Bank has agreed to a $4.9 million federal settlement of a consumer fraud case involving unauthorized withdrawals from customer accounts.

With the agreement, the bank will avoid criminal prosecution in the case.

The Justice Department on Tuesday announced the deal with CommerceWest, a small bank with operations in Southern California. The settlement resolves a criminal charge and a civil lawsuit against the bank.

Under terms of the agreement, CommerceWest, based in Irvine, California, admitted that it failed to report to the government suspicious activity in its accounts by payment processor V Internet Corp. The bank won't be prosecuted on condition it gives up its claim to about $2.9 million seized by law enforcement authorities from the CommerceWest accounts of V Internet.

In addition, CommerceWest will pay a $1 million civil penalty and will forfeit $1 million to the U.S. Postal Inspection Service's consumer fraud fund.

The Justice Department said CommerceWest enabled fraud by allowing V Internet, on behalf of fraudulent merchants, to make millions of dollars of unauthorized withdrawals from customer accounts.

The merchants included a telemarketing company and a company that charged customers for a payday loan referral fee they didn't authorize, according to the government. The Justice Department alleged that CommerceWest ignored clear warning signs that V Internet and the merchants were defrauding bank customers as the scheme ran from December 2011 through July 2013.

"We will hold financial institutions accountable when they choose unlawfully to look the other way while fraudsters use the bank's accounts to steal millions of dollars from American consumers," Benjamin Mizer, an acting assistant attorney general in the department's civil division, said in a statement.

CommerceWest's chairman and CEO, Ivo Tjan, said in a statement the bank is pleased that the investigation is over.

The bank said it doesn't believe that any employee "knowingly assisted with or willfully ignored signs of fraud" allegedly committed by V Internet. CommerceWest said it has improved its compliance program for reporting suspicious activity to the authorities, and that three compliance officers are no longer employed at the bank.