American Express Settles Wire Fraud Investigation for $138M

American Express (NYSE: AXP) has agreed to pay more than $138 million to resolve a wire fraud investigation related to its sales and marketing practices, federal authorities announced on Thursday. The New York-based financial giant provided inaccurate tax advice to customers and potential customers on wire products primarily marketed at small and mid-size businesses, the U.S. Attorney for the Eastern District of New York's office said. Customers were told, for example, that the company's fees were tax-deductible as a business expense, which was not the case.

The investigation revealed that American Express employees misled customers by touting tax breaks that simply didn't exist. This deceptive marketing campaign involved hundreds of employees defrauding their customers and the government, resulting in American Express paying more than $138 million to cover their deceit. The company has agreed to pay a $77.7 million criminal fine and forfeit $60.7 million, which represents the net revenue attributed to sales of the wire products.

American Express said the disputed sales practices ended in 2021 or earlier and that it will pay roughly $230 million in total to resolve the matter. The company cooperated extensively with these agencies and its regulators, taking decisive voluntary action to address these issues. This included discontinuing certain products several years ago, conducting a comprehensive internal review, taking appropriate disciplinary measures, making organizational changes, and enhancing policies, compliance, and training programs.



The settlement highlights the importance of financial institutions adhering to ethical business practices and providing accurate information to customers. The significant financial penalty imposed on American Express serves as a reminder that such misconduct will not be tolerated and can result in severe consequences.



In light of this settlement, investors may want to consider the potential impact on American Express' financial performance and reputation. While the company has taken steps to address the misconduct and prevent similar incidents in the future, the settlement may still have an effect on its earnings and share price. As always, investors should carefully evaluate the company's financial health and prospects before making any investment decisions.

Rating: Maintain Hold.