Good morning. Wells Fargo & Co.’s latest settlement over its long-running phony-account problems underscores how unchecked corporate culture could cause material financial damage.

The San Francisco-based bank agreed to pay $3 billion to settle investigations by the Justice Department and Securities and Exchange Commission over the fake-account problems. The bank admitted as part of the settlement that it “unlawfully misused customers’ sensitive personal information” and harmed some customers’ credit ratings, collecting millions of dollars in fees and interest in the process. Federal prosecutors blamed the creation of the unauthorized accounts on the bank’s aggressive sales goals.

“The conduct at the core of today’s settlements—and the past culture that gave rise to it—are reprehensible and wholly inconsistent with the values on which Wells Fargo was built,” Charles Scharf, who took over as chief executive in October and was tasked with fixing the crisis that has claimed two CEOs, said in a statement. “We are committing all necessary resources to ensure that nothing like this happens again, while also driving Wells Fargo forward.”

[Continued below…]

What’s striking about the settlement is that it demonstrates how misconduct that might appear at first insignificant to auditors and risk managers can have large and lasting financial consequences, Brian Tayan, a corporate governance researcher at Stanford University’s Graduate School of Business, tells Risk & Compliance Journal.

Prosecutors said the fake accounts were created between 2002 and 2016. During that time, the revenue generated by the misconduct was a small part of the total revenue generated by the bank. But when the phony accounts issue came to light in September 2016, damaging the bank’s reputation and spurring regulatory investigations, the problems led to significant costs, including the settlement announced Friday. In addition to the bank’s legal expenses, the phony accounts scandal has been a drag on its stock price.

“The fact that you can do something that would flip through all of your standard risk-and-control platforms because it’s immaterial, but it ends up being extremely material” has resonated across industries, Mr. Tayan said.

Iran is facing long-term financial isolation under new sanctions levied by the global terror-finance watchdog, sending a stout warning to Pakistan, which was given additional time to put its own house in order.

The Financial Action Task Force’s action against Iran was made more permanent by a little-noticed clause that gives the U.S. and its allies the ability to block removal of the sanctions even if Tehran adopts new antiterror and money-laundering regulations. The blacklisting and associated sanctions are expected to further choke Iran’s remaining financial and trade ties and politically isolate the country.

Although the FATF gave Pakistan a reprieve from its own blacklisting, the action against Tehran puts Islamabad on notice of the consequences it risks if it fails to meet the Paris-based watchdog’s recommendations.

The Securities and Exchange Commission is investigating whether Altria Group adequately disclosed to shareholders the risks when it spent $12.8 billion in 2018 to take a 35% stake in e-cigarette startup Juul Labs, according to people familiar with the matter.

The tobacco giant in January took a $4.1 billion charge on its Juul stake, following a $4.5 billion write-down in October. The SEC’s enforcement arm has questioned whether public companies adequately disclosed the risks of big investments and moved quickly enough to reduce the value of impaired assets. The agency is currently litigating such a case with Rio Tinto PLC.

• The SEC rejected a plan from Cboe Global Markets Inc. to introduce a four-millisecond speed bump to one of its exchanges. The regulator called Cboe’s proposal “discriminatory” and said Cboe hadn’t provided enough evidence to show that it would benefit the markets by curbing ultrafast trading strategies.
   
• Top law-enforcement officials from California, Texas and dozens of other states and U.S. territories are backing the latest bid by federal lawmakers to restrict the ability of financially troubled companies to file for bankruptcy protection far from where they have their headquarters.
   
• Massachusetts said it adopted new rules​ requiring brokers to act in their clients’ best interests, staking its claim as the first U.S. state to raise the bar on investor protections since a federal measure was struck down. Commonwealth officials will impose the new standard on brokers and agents who are licensed by Massachusetts.
   
• Bank CEOs Courted By Regulator On Low-Income Lending Overhaul

Stocks fell Monday as investors grappled with the potential economic fallout from mounting coronavirus infections in South Korea and the emergence of other fresh hot spots outside China.

Futures tied to the Dow Jones Industrial Average fell 2.5%, pointing to another day of likely declines for the index of U.S. blue-chip stocks. Equities in Europe opened sharply lower, with the Stoxx Europe 600 index declining 3.5% and falling into negative territory for the year.

Over the weekend, the Group of 20 major economies warned the fast-spreading coronavirus posed a serious risk to global growth and agreed to take action should the epidemic’s impact intensify.

With fears of contagion keeping Chinese workers home, production is getting pinched. In the U.S., General Motors unions have warned that a lack of China-made parts could slow assembly lines at sport-utility vehicle plants in Michigan and Texas; the company said it is working to mitigate the risk. Small U.S. businesses that sell everything from bicycles to custom software also are struggling with the ripple effects of the outbreak.

The outbreak, which played a role in pushing U.S. business activity in February to its lowest level in more than six years, has some companies poring over insurance policies in hopes of filing a claim for losses from business interruptions.

• Fed’s Bostic Expects Rates to Hold Steady, Doesn’t See Big Coronavirus Impact On U.S. Economy So Far

An independent report commissioned by Vale SA into last year’s deadly mine-dam failure found conflicts of interest between the mining giant and its auditors, faulty information-sharing inside the company and a compensation structure that prioritized financial returns. The committee that wrote the report said these factors contributed to the disaster, which killed 270.

The report was the second commissioned and released by Vale into the circumstances and causes of the January 2019 dam burst. The new report focused on corporate culture and practices that an independent committee, appointed by Vale, said contributed to the disaster. Committee members included a former Brazilian supreme court justice.

Fraudsters are stealing billions of dollars each year by combining sophisticated email hacking with old-fashioned wire transfers. Banks and law-enforcement officials are struggling to curb the problem, while victims say they are finding it nearly impossible to get their money back.

Years ago, lenders only had to worry about real-life bank robbers. Now, the wire-transfer scam puts them in a tough position. Customers expect them to move money quickly for legitimate transactions, while also guarding against hackers that have infiltrated clients.

The largest banks are most likely to be conduits for the wire-transfer scams, according to the American Bankers Association. But community banks, with smaller technology budgets to build their defenses, are also vulnerable.

• The recent indictment of a researcher—who is accused of lying on her U.S. visa application to conceal she is a lieutenant in the Chinese military—shows how U.S. universities’ openness to international collaboration in cutting-edge research leaves them vulnerable to potential exploitation.
   
• A British court is set to begin examining whether to extradite Julian Assange to the U.S. to stand trial on spying charges, the latest episode in Washington’s pursuit of the WikiLeaks founder for publishing a trove of secret documents relating to the Iraq and Afghanistan wars.
   
• Tapping Trump’s Anger About 2016 Surveillance, White House Seeks Overhaul of Spying Law

Nissan’s board cut the exit package of ousted Chief Executive Hiroto Saikawa, who presided over a pronounced decline in the car maker’s earnings, according to people familiar with the decision. The company’s human-resources staff initially calculated that Mr. Saikawa was due around $15 million as a lump sum upon his departure from the company, but the board decided to pay him about $3 million, these people said.

The board also canceled a system that allowed departing executives to remain with Nissan in a consulting role. As a result, the 66-year-old Mr. Saikawa severed his connection completely with the company as of Feb. 18. Mr. Saikawa, long a lieutenant of former Chairman Carlos Ghosn, was the company’s chief executive when Mr. Ghosn was arrested in Tokyo and charged with financial misconduct. Mr. Ghosn says he is innocent.

• Artificial intelligence is expected to alter how Americans work on a scale similar to the impact of robotics and desktop computers. But employees affected by it are much more likely to be in management or professional roles than laborers turning screws or filing papers. The most vulnerable occupations include marketing specialists, financial advisers and computer programmers, a study from the Brookings Institution found.
   
• Finance chiefs are shelling out more than they expected in wages as job candidates press for higher salaries amid a tight labor market. Fifty-four percent of U.S. employees and managers said they tried to negotiate higher pay with their last employment offer, according to staffing firm Robert Half International Inc. That is up from 39% in 2018.
   
• Boeing is planning more support for suppliers for its 737 MAX jetliner to prepare them for restarting production—and to dissuade some from seeking more business from Airbus. Boeing also found debris inside the fuel tanks of about two-thirds of undelivered 737 MAX jets inspected so far, according to federal and aviation-industry officials, indicating a bigger production-related problem than the company previously suggested.
   
• DSV Expects Job Reductions of Up to 4,000 on Panalpina Integration

• EBay is taking steps toward a potential sale of its classified-ads business, which could be worth roughly $10 billion, according to people familiar with the matter. 
   
• Intuit is nearing a deal to buy personal-finance portal Credit Karma for about $7 billion in cash and stock, in a move that would push the bookkeeping-software giant further into consumer finance, according to people familiar with the matter.