American Express pays a complete of about $230 million to resolve federal wire fraud investigations and resolve civil charges of false promoting, the corporate said Thursday.
That includes greater than $138 million in a non-prosecution agreement with the U.S. Attorney's Office in Brooklyn, New York, related to allegations that American Express gave its customers “inaccurate tax advice” on two Wire products.
Separately, the banking giant pays $108.7 million to resolve U.S. civil claims Civil Division of the Ministry of Justice that, amongst other things, it had fraudulently marketed bank cards to small businesses.
Amex said it had also reached an “agreement in principle with the staff of the Board of Governors of the Federal Reserve System,” which is predicted to be finalized in the approaching weeks.
“Pursuant to the agreements and after credit, American Express will pay a total of approximately $230 million to resolve these matters,” Amex said.
The major agreement follows recent agreements by other major firms including MasterCard And blockto settle claims from prosecutors or regulators.
“American Express misled its customers by touting tax breaks that simply didn’t exist,” Harry Chavis, special agent in command of the IRS’ New York Criminal Investigation Division in New York, said in a press release.
Chavis said: “This fraudulent marketing campaign … involved hundreds of employees who defrauded their customers and the government.”
Prosecutors said in a news release that in 2018 and 2019, Amex launched the Wire products Payroll Rewards and Premium Wire, which were “marketed as a means to achieve tax savings.”
The customers, who primarily included small and medium-sized businesses, were told that the fees from the transfers were tax-deductible as business expenses and that the shoppers would otherwise have paid taxes on the fees, prosecutors said.
Customers were also told that Membership Reward points they received in exchange for the transactions were earned tax-free and due to this fact exceeded the actual cost of the fees.
But that pitch “was based on false tax advice, namely that the transfer fee was fully deductible as a business expense,” prosecutors said.
“Charging a transfer fee – well above what competitors offer in the market – for the purpose of generating personal benefit is not a 'normal' and 'necessary' business expense” as required, they said.
An internal investigation into these marketing practices in early 2021 led to the firing of about 200 employees, in accordance with prosecutors. In November of the identical yr, the 2 products were completely discontinued.
The separate civil settlement announced Thursday focused on allegations that AmEx “fraudulently marketed credit cards” through “an affiliated company that made sales pitches to small businesses.”
The practices, which took place from 2014 to 2017, included “misrepresenting card rewards or fees” and “whether credit checks were being conducted without the customer's consent,” the DOJ said.
The practices also allegedly included “providing false financial information to potential customers, such as overstating a company’s income.”
Amex also allegedly attempted to “deceive its federally insured financial institution” to permit small business customers to buy bank cards without the legally required employer identification numbers, often known as EINs.
“The United States alleged that American Express employees used 'dummy' EINs such as '123456788' when opening small business credit cards in 2015 and the first half of 2016,” the DOJ said.
Amex's settlement agreement with the DOJ's Civil Division doesn’t include an admission of liability or wrongdoing by the corporate, which has denied the allegations in regards to the EINs and fraudulent bank card sales practices.
“When financial companies use deceptive sales tactics or falsify information to cover up noncompliance with applicable regulations, they jeopardize the integrity of our financial system,” Assistant Attorney General Brian Boynton, head of the Civil Division, said in a press release.
“Today’s settlement makes it clear that the Department will hold accountable those who violate the trust placed in them to follow the rules of our financial institutions and to be truthful in their business practices,” Boynton said.
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