Reported by Ben Eisen and Ben Foldy

Wells Fargo is struggling with its regulatory obligation to monitor financial crime, the latest challenge in the bank’s yearslong effort to recover from a series of scandals.

Regulators have issued the bank formal orders to be better at catching criminals who may be using its accounts or products, according to people with knowledge of the matter. At the same time, the bank is facing a lawsuit claiming it allowed an alleged $490 million Ponzi scheme to operate.

The regulators are focused on the bank’s broad consumer-watching systems, not any specific client or event, but the lawsuit’s allegations suggest what can go wrong when a bank’s monitoring systems fail.

Banks play a crucial behind-the-scenes role in monitoring the movement of money to prevent crimes such as laundering and terrorism.

The regulators have privately rebuked Wells Fargo multiple times since early last year for improper oversight of criminal activity in its consumer bank, the people said.

Concerns were identified by the Federal Reserve and the Office of the Comptroller of the Currency in what are known as matters requiring attention and matters requiring immediate attention. The bank’s fix-it work is continuing, and a public penalty such as a consent order hasn’t been ruled out, the people said.

Last year, after the concerns were identified, Wells Fargo replaced its executive responsible for compliance with the Bank Secrecy Act, which requires banks to keep records and file reports relating to illegal activity. Neither the regulatory rebukes nor the personnel move was previously disclosed.

Wells Fargo is rebuilding its sprawling risk and control apparatus so it can better prevent and catch problems.

Read full report: https://www.wsj.com/finance/banking/regulators-say-wells-fargo-isnt-doing-enough-to-police-customer-crimes-0809281d?mod=e2tw