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Government accuses Four Oaks Bank of turning blind eye to illegal activity

Posted January 8, 2014

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— The U.S. Justice Department filed suit Wednesday against Four Oaks-based Four Oaks Bank and its parent company, alleging that they allowed a third-party payment processor to debit people's accounts for illegal activities, including payday loans, online gambling and a Ponzi scheme.

The government is seeking the maximum allowed penalties in the civil suit, as well as an injunction prohibiting Four Oaks Bank from working with the Texas-based payment processor.

The suit alleges that the bank has, since 2009, provided the unidentified processor direct access to the Federal Reserve Bank of Atlanta in exchange for sizable fees. The arrangement allowed the processor to debit customer accounts without authorization.

"Four Oaks Bank officials recognized that its business model with (the processor) created a significantly increased fraud risk for the bank and for consumers," the suit states.

Bank executives turned a blind eye to repeated complaints from people who said payday lenders were racking up exorbitant fees and interest on loans that were supposedly paid off, according to the suit, and they also ignored a notice from the Arkansas Attorney General's Office that some people in that state were being charged for payday loans even though they are illegal in that state.

The suit alleges that the Texas processor also became a conduit for other third-party processors, include Redfall, which federal prosecutors linked to online gambling, and Rex Venture Group, which processed $60 million in transactions through Four Oaks bank in a Ponzi scheme known as ZeekRewards.

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