TCF Financial Penalized $10M - Analyst Blog

By Zacks | January 28, 2013 AAA

On Friday, TCF National Bank, the primary subsidiary of TCF Financial Corporation (TCB) consented to pay a $10 million federal penalty. The payment is in a bid to settle the regulatory reporting issue of the company with the Office of the Comptroller of the Currency (OCC). The penalty is expected to impact fourth-quarter earnings of TCF Financial by 6 cents per share.

Several years ago, TCF National Bank failed to comply with the Bank Secrecy Act (BSA). Upon scrutinizing the transactions between Nov 2008 and Jul 2010, federal regulators discovered faulty practices being exercised by the bank. They concluded that the bank failed to file timely suspicious activity reports as was required under BSA.

Notably, federal regulators discovered some cash transactions taken up by the bank, signifying wire transfers of funds without mention of the source and purpose of such funds. Moreover, some instances which indicated TCF bank's failure to adequately report potential terrorist financing were revealed.

The $10 million settlement follows the Jul 2010 BSA-related consent order with the OCC that intended TCF bank to correct deficiencies in its anti-money-laundering programs. Therefore, the banks incorporated certain broad changes to reinforce its BSA compliance program along with the settlement in order to resolve the issue.

Thus, such initiatives taken by the OCC along with TCF bank and the regulators is a step forward towards ensuring continued protection and security of the deposits made by the customers. Moreover, OCC's guidance in strengthening the BSA program for the bank would help improve the safety of the banking system.

Overall, firms in the U.S. are actively responding to legal and regulatory pressures, displaying competence to encounter impending challenges. However, the potency of the sector is not expected to return to its pre-recession peak anytime soon. Economic intricacies, both domestic and overseas, may lead to more disappointments in the upcoming quarters.

Currently, TCF Financial carries a Zacks Rank #3 (Hold). Among peers, Heartland Financial USA Inc. (HTLF) carries a Zacks Rank #1 (Strong Buy), while Huntington Bancshares Incorporated (HBAN) and First Interstate Bancsystem Inc. (FIBK) carry a Zacks Rank #2 (Buy).

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