WASHINGTON – CommerceWest Bank, of Irvine, California, agreed to a $4.9 million civil and criminal resolution arising from consumer fraud committed through the bank, the U.S. Justice Department announced today.
The civil complaint alleges that CommerceWest Bank knowingly facilitated consumer fraud by permitting the payment processor to make millions of dollars of unauthorized withdrawals from consumer bank accounts on behalf of fraudulent merchants, federal officials said.
“CommerceWest Bank ignored a parade of red flags indicating that a third-party payment processor was defrauding hundreds of thousands of innocent victims,” said Acting Assistant Attorney General Benjamin C. Mizer of the Justice Department’s Civil Division.
Adding, “As the civil and criminal actions filed against CommerceWest Bank today demonstrate, 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.”
In addition to the $4.9 million settlement, the bank entered into a deferred prosecution agreement along with reforming bank practices to prevent another similar fraud in the future, officials said.
According to the civil complaint, these are the facts surrounding this case:
- From December 2011 through July 2013, CommerceWest Bank worked with V Internet Corp LLC, a third-party payment processor based in Las Vegas.
- V Internet processed transactions for fraudulent merchants that withdrew money from consumers’ bank accounts without authorization.
- These merchants included a fraudulent telemarketing company and a company that charged hundreds of thousands of victims for a payday loan referral fee they had never authorized.
- In early 2013, V Internet took over the payday loan referral scheme, operating as the payment processor and sole merchant from January 2013 through July 2013.
- The complaint alleges that CommerceWest ignored clear warning signs indicating that V Internet and its merchants were defrauding consumers.
- V Internet’s debit transactions resulted in an abnormally high rate of rejected transactions.
- About 50 percent of the transactions were returned by consumers and their banks.
- Many of those returned transactions included sworn affidavits, in which victims stated, under penalty of perjury, that the withdrawals on their accounts were unauthorized.
U.S. Postal Inspection Service seized assets:
Officials seized more than $2.9 million from V Internet’s accounts at CommerceWest Bank.
Postal inspectors additionally seized property purchased by V Internet’s owner with the proceeds of his fraudulent activity, including five airplanes, a Land Rover, a Dodge Charger, multiple tractors, five all-terrain vehicles and a fire truck, according to authorities.
The criminal information filed today charges CommerceWest with willfully failing to file Suspicious Activity Reports, as required by the Bank Secrecy Act.
The criminal charge will be deferred for two years under an agreement that requires CommerceWest Bank to admit to its wrongdoing, give up any claim to more than $2.9 million previously seized from V Internet’s bank accounts at CommerceWest, and cooperate fully in other civil and criminal investigations, according to officials.