Wells Fargo Fake Accounts Scandal – Who Should We Blame?

Who Should We Blame?

Wells Fargo Fake Accounts Scandal

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Wells Fargo fake accounts scandal - Overview

• Public informed on 8th of September 2016 that Wells Fargo employees have created ghost accounts.

• Fake accounts have been opened since 2011

• More than 2 million phony accounts created• 1,5 million savings accounts• More than 500,000 credit card accounts



Reasons for the creation of ghost accounts

• Wells Fargo internal procedures in relation to bonus rewards

• Sales incentives structure• Because of the sales incentive culture of Wells Fargo, employees

opened fake accounts to earn unwarranted fees.

• Major motive – EARNING MORE MONEY



Consequences from the Wells Fargom fake accounts scandal

• 5,300 employees fired because of the scandal• Wells Fargo should pay $185 million in fines• $5 million to refund customers• Possible clawback of Executeive bonusis• Damaging the trust in banking system• The sustainability and adequacy of sales incentives structure becames

debatable• Decrease in Wells Fargo value – Loss for investors



Should we put the entire blame on Wells Fargo?

• Yes, Wells Fargo is responsible for the fake account scandal

• Weak internal control

• Executives were looking the other way (most probably) to earn millions in bonuses



Customer’s partial responsibility in Wells Fargo

scandalWhat should we ask about the customer behavior:• How come customers are not aware what bank products they are

using?• Why customers have accepted to blindly pay different fees and charges,

for products they didn’t even knew they have?• Were Wells Fargo employees using customer’s lack of financial

knowledge, or they have been using customer’s ignorance when it comes to bank products?• Was it so hard for bank customers to check out the products they are

using in their bank?



Lessons learned from Wells Fargo fake account scandal

• Customers should be aware about the products they are using• Customers should pay more attention to the fees they are paying• Banks should change their sales strategy, they should promote no

fraud culture• Stronger internal controls



What do you think, do customers have a partial responsibility for the opportunity

leading towards the fake accounts scandal.

Comment at www.bankactivities.com




Economy & Finance

Wells Fargo Fake Accounts Scandal – Who Should We Blame?