Court filing

Expert Declaration of Teresa A. Pesce (Exhibit 2) — In re Bank of America California Unemployment Benefits Litigation (Dkt. 350-3, S.D. Cal. No. 3:21-md-02992)

Filed October 24, 2024 in In re Bank of America California Unemployment Benefits Litigation; one of 1415 filings from this case.

Record facts

Court	U.S. District Court for the Southern District of California
Filed	2024-10-24

U.S. District Court for the Southern District of California · No. 3:21-md-02992-GPC-MSB · Doc. 350-3 · 2024-10-24 · Docket on CourtListener

Full text

EXHIBIT 2
FILED
PROVISIONALLY
UNDER SEAL WITH
REDACTIONS
PURSUANT TO
STIPULATED
PROTECTIVE ORDER
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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF CALIFORNIA
SAN DIEGO DIVISION
IN RE: BANK OF AMERICA
CALIFORNIA UNEMPLOYMENT
BENEFITS LITIGATION
Case No. 3:21-md-02992-GPC-MSB
EXPERT DECLARATION OF TERESA A. PESCE
October 24, 2024
FILED PROVISIONALLY UNDER SEAL
PURSUANT TO STIPULATED PROTECTIVE ORDER
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Table of Contents

I.
ASSIGNMENT ................................................................................................................... 1
II.
QUALIFICATIONS ........................................................................................................... 2
III.
SUMMARY OF RELEVANT FACTS CONSIDERED .................................................... 4
IV.
SUMMARY OF OPINIONS .............................................................................................. 5
V.
BACKGROUND ................................................................................................................ 7
1.
Banks Have a Duty to Prevent Potentially Criminal Activity. ................................. 7
2.
National Crisis .......................................................................................................... 9
3.
California’s Employment Development Department ............................................. 10
4.
Bank of America’s Role in Distributing EDD Benefits .......................................... 12
5.
Warnings from Regulatory Agencies and Law Enforcement ................................. 14
VI.
THE BANK MUST ADMINISTER THE PROGRAM FACING BOTH AN
UNPRECEDENTED NUMBER OF CLAIMS AND AN UNPRECEDENTED
VOLUME OF FRAUD. .................................................................................................... 16
VII.
MR. KREIS IGNORES THE REALITIES OF THE BANK’S POSITION DURING
UNPRECEDENTED CIRCUMSTANCES. ..................................................................... 25
VIII.
PLAINTIFFS’ ASSUMPTION THAT NON-EXCLUSION FROM THE BANK’S
REGULATORY REMEDIATION PLAN ELIMINATES FRAUDSTERS FROM THE
PROPOSED CLASS IS WITHOUT BASIS. ................................................................... 27
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I.
ASSIGNMENT
1. I have been engaged by Goodwin Procter LLP (“Counsel”), counsel for Bank of
America, N.A. (“the Bank”) to provide an expert declaration in the matter of In Re Bank
of America California Unemployment Benefits Litig., Case No. 3:21-md-02992-GPC-
MSB. This declaration is based upon my expertise, experience, and knowledge of the
regulatory environment and industry practices in the area of financial crimes, in particular
with respect to fraud and anti-money laundering (“AML”) requirements and expectations
driven by the Bank Secrecy Act (“BSA”) as amended by the USA PATRIOT Act.
Counsel has asked me to provide my opinion on the regulatory and law enforcement
environment during a period when there was an unprecedented volume of fraudulent
claims driven by lax controls deployed by the State of California’s Employment
Development Department (“EDD”) when conferring unemployment benefits pursuant to
COVID-19 related relief programs. In addition, Counsel has asked me to respond to
portions of the expert report of J. Daniel Kreis filed on August 29, 2024 (the “Kreis
Report”)1 that address, or fail to address, the unique circumstances under which the Bank
was working during the COVID-19 pandemic. I was also asked to review the proposed
“claim denial class” described in the expert report of Greg J. Regan (the “Regan Report”)
and opine on whether any potential fraudulent individuals may be included in the
proposed class.2 As this Declaration does not address all aspects of the Kreis or Regan
Reports, I reserve the right to respond to the remainder of the opinions set forth in those
Reports if asked by Counsel.

2. In furtherance of this assignment and to assist in my understanding of the facts and
circumstances surrounding this matter, Counsel provided me with materials pertaining to
this case, including pleadings and other court documents, deposition transcripts, and
materials produced in discovery, which are referenced and cited herein. A list of

1 Expert Class Certification Report of J. Daniel Kreis, In re: Bank of America California Unemployment Benefits
Litigation, Case No.: 3:21-nd-02992-GPC-MSB (Aug. 29, 2024).
2 Expert Class Certification Report of Greg J. Regan, In re: Bank of America California Unemployment Benefits
Litigation, Case No.: 3:21-nd-02992-GPC-MSB (Aug. 29, 2024).
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materials reviewed and cited is appended hereto at Appendix A. I reserve the right to
supplement or amend my declaration should new information become available. I am
prepared to testify at trial on the topics addressed in this declaration.

3. Any and all opinions stated herein are mine and mine alone. My compensation in this
matter is not dependent on my opinions in or the outcome of this case. I am being
compensated at my standard rate of $800 per hour for work related to preparing my
declaration and $1,000 per hour for deposition and trial testimony. In addition, staff at
Cornerstone Research assisted me by performing research and other tasks under my
direction in this matter.
II.
QUALIFICATIONS
4. I am an industry leader and subject matter expert in financial-crimes regulatory
enforcement and compliance, with an extensive and varied history of working in and with
the financial services industry, including in government, industry, and consulting. I have
led large teams and managed significant projects for global financial institutions, and I
have designed and implemented financial-crimes compliance programs and
organizational structures. I have been called upon by boards of directors and senior
management of large, international financial institutions to provide guidance and support
as those institutions navigated enforcement actions.

5. I have served, and currently serve, as an expert witness and expert consultant in
litigations and investigations relating to financial crimes, including AML, sanctions, and
fraud. I have provided expert opinions in cases in the United States and abroad.

6. I currently own and operate an independent consulting firm, Terry Pesce & Co. LLC,
established in September 2020. My clients range from multinational financial institutions
to fintechs and non-traditional firms. I have worked as an independent consultant with
some of the largest global financial institutions headquartered and/or doing business in
North America, Europe, and Asia. In addition to more traditional depository institutions,
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I have worked with the world’s largest investment banks, money service businesses,
insurance companies, and more regional institutions.

7. Prior to establishing my consulting firm, I spent 13 years as a Principal in KPMG LLP’s
(“KPMG”) Forensic Advisory Services, serving as Global Head of Anti-Money
Laundering and Head of the firm’s Financial Crimes group. I spearheaded diverse
engagements for financial institutions addressing numerous issues concerning financial
crimes and sanctions. My work was both proactive, assisting firms in designing new
compliance programs and conducting independent assessments, and reactive, assisting
firms responding to enforcement actions. I have often been called upon to report directly
to law enforcement agents, prosecutors, and regulatory agencies.

8. Before joining KPMG in early 2007, I was Executive Vice President and AML Director
for HSBC North America (“HSBC”). I joined HSBC in late 2003 to build out the AML
compliance function for all U.S. business lines and products in response to a regulatory
order imposed by the Federal Reserve Bank of New York earlier that year and lifted by
the Office of the Comptroller of the Currency (“OCC”) during my tenure in 2006. I left
HSBC to join KPMG shortly thereafter.

9. Prior to joining HSBC, I was an Assistant United States Attorney in the Southern District
of New York, serving as Chief of the Major Crimes Unit, and Deputy Chief of the
Criminal Division. From 1999 through 2003, I was responsible for supervision and
oversight of all money-laundering and tax prosecutions. I worked closely with law
enforcement officers and agents and the financial regulatory agencies responsible for
oversight of AML enforcement. During my tenure at the U.S. Attorney’s office, I
investigated and prosecuted numerous cases involving and charging money laundering
and other complex fraud cases.

10. I have served as an Associate Professor for the Case Western School of Law, Masters of
Financial Integrity program, lecturing students from around the globe on a variety of
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subjects relevant to financial crimes enforcement and compliance, as well as criminal
law.

11. I hold a Bachelor of Arts from Columbia University, where I graduated magna cum
laude, Phi Beta Kappa, and I hold a Juris Doctor from Columbia Law School.

12. I am a recognized industry speaker and have published numerous pieces on financial
crimes and enforcement. A complete CV, including a list of publications and matters in
which I have provided testimony, is appended hereto at Appendix B.
III.
SUMMARY OF RELEVANT FACTS CONSIDERED
13. The Bank’s partnership with EDD predated the COVID-19 pandemic. Pre-COVID-19,
the Bank issued prepaid cards to a relatively stable and predictable number of
unemployment claimants that EDD had vetted in advance for eligibility. This included
identity and employment verification checks.

14. During the COVID-19 pandemic, the paradigm shifted dramatically. Federal government
programs made unemployment benefits available to individuals who either did not need
them before or were not entitled to them before. The Bank was directed by EDD to
provide prepaid cards to an unprecedented number of recipients –

. In an effort to get funds into the hands of the masses of claimants, EDD
relaxed its eligibility controls, allowing claimants to apply for unemployment benefits
without verifying their former employment, wage, or salary history (adopting a “pay and
chase” model), which resulted in cards being issued to fraudsters – e.g., recipients
fraudulently claiming entitlement and identity thieves. As the number of cardholders
increased and fraud controls were relaxed, the number of benefits recipients making
claims and seeking reimbursement for purportedly unauthorized transactions on their
cards increased exponentially.

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15. At the same time the Bank was presented with an unprecedented volume of unauthorized
transaction claims in the EDD portfolio, the Bank received numerous warnings from both
its regulators and law enforcement to be vigilant to prevent, detect, and report rampant
fraud associated with COVID-19-related relief, and, in particular, unemployment
insurance. Regulators and law enforcement instructed banks to take action in the face of
COVID-19-related fraud. Banks have an obligation to prevent, detect, and report
financial crime, an obligation that was stressed by regulators in their alerts.

16. Regulatory warnings of rampant fraud were substantiated by the Bank’s own review of
unauthorized transaction claims. The Bank uncovered significant fraud in the EDD
portfolio.

17. Plaintiffs have tendered the reports of two experts, purportedly to support their motion for
class certification. While the Regan Report addresses class identification, the Kreis
Report addresses only Plaintiffs’ positions on the merits; Mr. Kreis’s report contends that
the Bank should have addressed suspected fraud in the EDD portfolio as business as
usual, wholly ignoring the extraordinary circumstances under which the Bank was
operating.
IV.
SUMMARY OF OPINIONS
18. Recognizing its responsibility to law enforcement to prevent rampant fraud, and faced
with unprecedented volumes of claims, the Bank devised the Claims Fraud Filter (“CFF”)
to identify likely fraudulent unauthorized transaction claims.

In my experience, Banks routinely use automated
detection technology to detect fraud and other suspicious activity. Regulators expect
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benefits, which has been estimated to exceed $32 billion of EDD’s portfolio and nearly
40 percent of benefits issued pursuant to the PUA, and EDD’s mishandling of fraud
prevention, fraudsters remain in the population, and it would require a case-by-case
review to identify every likely fraudster.
V.
BACKGROUND
1.
Banks Have a Duty to Prevent Potentially Criminal Activity.
22. The BSA requires banks to implement compliance programs to prevent, detect, and report
potentially suspicious activity, including fraud, to the Financial Action Criminal
Enforcement Network (“FinCEN”) of the U.S. Department of the Treasury.4 Prevention
under the BSA is furthered by banks knowing the identity of their customers pursuant to
Customer Identification Program (“CIP”)5 requirements, and knowing the risk the
customer poses to the bank through Customer Due Diligence (“CDD”).6 Through these
controls, banks can better understand who is transacting through their bank, and what
transactions are expected and normal for the customer.7 In the absence of these controls,8
banks risk providing services to illicit actors who would use the bank for criminal
purposes.

4 FinCEN is the federal agency charged with administering and enforcing the BSA. FinCEN, What We Do,
https://www.fincen.gov/what-we-do. See also Federal Financial Institution Examination Counsel Bank Secrecy
Act/Anti-Money Laundering Examination Manual (“FFIEC Manual”), Introduction, Role of Government Agencies
in the BSA (2015), https://bsaaml.ffiec.gov/manual/Introduction/01. Banks are required to file Suspicious Activity
Reports (“SARs”) upon the identification of potentially suspicious activity. 31 C.F.R. § 1020.320.
5 31 C.F.R. § 1020.220. See FFIEC Manual, Assessing Compliance with BSA Regulatory Requirements, Customer
Identification Program (2021),
https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirements/01.
6 FFIEC Manual, Assessing Compliance with BSA Regulatory Requirements, Customer Due Diligence, Overview
(2018), https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirements/02; 31 C.F.R. §
1020.210.
7 Id. (“The objective of CDD is to enable the bank to understand the nature and purpose of customer relationships,
which may include understanding the types of transactions in which a customer is likely to engage. These processes
assist the bank in determining when transactions are potentially suspicious.”).
8 Id. (“CDD policies, procedures, and processes are critical to the bank because they can aid in … [a]voiding
criminal exposure from persons who use or attempt to use the bank’s products and services for illicit purposes.”).
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23. Two critical purposes of fraud detection are to prevent fraud and to prevent loss.9 Banks
deploy fraud software and technology solutions to assist with anti-fraud efforts. These
include detection scenarios to stop transactions before they occur and, where necessary,
cancel access, by, for example, cancelling prepaid, debit, or credit cards.10

24. Regulators do not expect banks merely to report repeated or egregious instances of
criminal activity; regulators expect banks to have processes in place to close accounts
and/or terminate relationships.11 Per regulatory guidance, banks are expected to have
policies, procedures, and processes in place on when to terminate relationships in the face
of elevated risk factors.12 In my experience, banks are under constant regulatory scrutiny,
and some have been subject to regulatory criticism and/or potential enforcement actions
when maintaining accounts for bad actors.13

9 Office of the Comptroller of the Currency, OCC Bulletin 2019-37: Operational Risk: Fraud Risk Management
Principles (July 24, 2019), https://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-37.html,
Appendix of Exhibits to the Declaration of Laura Brys in Support of Defendant’s Opposition to Plaintiffs’ Motion
for Class Certification, Ex. (“DX”) 108.
10 Office of the Comptroller of the Currency, OCC Bulletin 2019-37: Operational Risk: Fraud Risk Management
Principles (July 24, 2019), https://www.occ.treas.gov/news-issuances/bulletins/2019/bulletin-2019-37.html (DX
108). See Federal Trade Commission, When a Company Declines Your Credit or Debit Card, Consumer Advice
(Aug. 2022), https://consumer.ftc.gov/articles/when-company-declines-your-credit-or-debit-card (“Your card may
be declined for a number of reasons . . . the card issuer sees suspicious activity that could be a sign of fraud.”).
11 Board of Governors of the Federal Reserve System, FDIC, FinCEN, NCUA, OCC, Answers to Frequently Asked
Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations (Jan. 19,
2021), https://www.fincen.gov/sites/default/files/2021-01/Joint%20SAR%20FAQs%20Final%20508.pdf (“The
decision to maintain or close a customer relationship as a result of the identification of suspicious activity is a
determination for a financial institution to make based on the information available to it, its assessment of money
laundering or other illicit financial activity risks, and established policies, procedures, and processes. Financial
institutions have the flexibility to develop risk-based procedures and monitoring processes for the purpose of
updating the customer risk profile and determining when to maintain or close accounts. Generally, financial
institutions have policies, procedures, and processes in place that establish an escalation process for decisions to
maintain or terminate customer relationships based on relevant factors, including SAR filing(s). These processes
establish criteria, including when review by senior management and legal staff is warranted, for the decision to
maintain or terminate the customer relationship in light of elevated risk factors.”).
12 Id.
13 Office of the Comptroller of the Currency, OCC Issues Cease and Desist Order, Assesses $450 Million Civil
Money Penalty, and Imposes Growth Restriction Upon TD Bank, N.A. for BSA/AML Deficiencies (Oct. 10, 2024),
https://www.occ.treas.gov/news-issuances/news-releases/2024/nr-occ-2024-116.html.
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2.
National Crisis
25. Beginning in the spring of 2020, the U.S. faced an unprecedented health crisis due to the
COVID-19 pandemic.14 The U.S. was placed under stay-at-home orders, which resulted
in mass unemployment.15 To address the hardship caused by unemployment, Congress
passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act at the end of
March 2020, which provided unemployment benefits to those not traditionally eligible
(Pandemic Unemployment Assistance or “PUA”), additional benefits to those who had
exhausted benefits (Pandemic Emergency Unemployment Compensation or “PEUC”),
and weekly supplements (Federal Pandemic Unemployment Compensation or
(“FPUC”).16 Available funds were drawn down by and distributed by states, with four
states (California, Georgia, Kentucky, and Michigan) taking approximately one-third of
all funds between March 28, 2020 and March 14, 2021.17 In an effort to distribute funds
quickly given the unprecedented number of unemployment claims, states relaxed
eligibility and identification procedures, which resulted in widespread fraud.18 The

14 Trump White House, Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus
Disease (COVID-19) Outbreak (Mar. 13, 2020), https://trumpwhitehouse.archives.gov/presidential-
actions/proclamation-declaring-national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/.
15 Centers for Disease Control, Timing of State and Territorial COVID-19 Stay-at-Home Orders and Changes in
Population Movement – United States, March 1–May 31, 2020 (Sep. 4, 2020),
https://www.cdc.gov/mmwr/volumes/69/wr/mm6935a2.htm; Congressional Research Service, Unemployment Rates
During the COVID-19 Pandemic (Aug. 20, 2021) at 5, https://crsreports.congress.gov/product/pdf/R/R46554;
Auditor of the State of California, Employment Development Department: EDD’s Poor Planning and Ineffective
Management Left it Unprepared to Assist Californians Unemployed by COVID-19 Shutdowns (Jan. 2021) (“EDD’s
Poor Planning, Jan. 2021”) (DX 89) at 1, https://information.auditor.ca.gov/pdfs/reports/2020-128and628.1.pdf.
16 U.S. Department of the Treasury, About the CARES Act and the Consolidated Appropriations Act,
https://home.treasury.gov/policy-issues/coronavirus/about-the-cares-act; U.S. Department of Labor Press Release,
U.S. Department of Labor Announces New Guidance to States on Unemployment Insurance Programs (Dec. 30,
2020), https://www.dol.gov/newsroom/releases/eta/eta20201230-1; U.S. Department of Labor, Office of Inspector
General, COVID-19: ETA and States Did Not Protect Pandemic-Related UI Funds From Improper Payments
Including Fraud or From Payment Delays (Sep. 30, 2022) (“DOL OIG Report”) at 1–2,
https://www.oig.dol.gov/public/reports/oa/2022/19-22-006-03-315.pdf.
17 DOL OIG Report at 2.
18 United States Government Accountability Office, GAO-22-105715: Significant Improvements Are Needed to
Ensure Transparency and Accountability for COVID-19 and Beyond (Mar. 17, 2022) (DX 87) (“When reviewing
the federal government’s response to the COVID-19 pandemic, GAO found that agencies had significant
shortcomings in their application of fundamental internal controls and financial and fraud risk management
practices.”), https://www.gao.gov/assets/gao-22-105715.pdf; Employment Development Department, State of
California, Annual Report California Fraud Deterrence and Detection Activities (June 2021) at 3 (“EDD Annual
Report, June 2021”) (“The federal Pandemic Unemployment Assistance (PUA) program, where much of the current
fraud is concentrated, was designed to provide unemployment benefits to independent contractors and the self-
employed.”), https://edd.ca.gov/siteassets/files/about_edd/pdf/fraud_deterrence_and_detection_activities_2021.pdf
(DX 16); BANA_EDD_MDL-00080294–352 (Auditor of the State of California, Significant Weaknesses in EDD’s

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EDD’s June 2021 Annual Report states that “[t]raditionally state unemployment agencies
rely on employment or wage records to verify eligibility. The self-certification of prior
wages, made allowable under the PUA program, made it inherently susceptible to fraud.
With the lack of verifiable criteria regarding eligibility, fraud increased with the number
of claims filed.”19
3.
California’s Employment Development Department
26. EDD was responsible for administering the state unemployment benefits program
generally, including PUA for the State of California.20 Prior to PUA, California had
safeguards in place to determine both the identity of claimants and eligibility to receive
benefits; traditionally, the state could verify the claimant’s prior employment as well as
the date they became unemployed and their wage or salary history.21 However, during
the COVID-19 pandemic, to distribute benefits quickly, California eliminated many of
the eligibility controls previously in place.22 The EDD’s June 2021 Annual Report states
that “[w]ith the absence of comparable wage information to validate the claims, the PUA
program was particularly vulnerable to fraud. This was evident at the end of 2020 with
an identified fraud rate in the PUA program of just over 24 percent, or approximately
$10.5 billion.”23 Subsequent reports from the DOL-OIG have reported that more than 35
percent of the PUA benefits issued nationwide were likely fraudulent.24

Approach to Fraud Prevention Have Led to Billions of Dollars in Improper Benefit Payments, (Jan. 2021)
(“Weaknesses in EDD’s Approach, Jan. 2021”), (DX 88) at 310 (“It is almost certain that because of its lax
approach, EDD missed stopping payment on fraudulent claims during the pandemic.”).
19 EDD Annual Report, June 2021 (DX 16) at 3.
20 Weaknesses in EDD’s Approach, Jan. 2021 (DX 88) at 300 (“The Employment Development Department (EDD)
is responsible for administering the State’s unemployment insurance (UI) program, which provides partial wage
replacement benefits to eligible Californians who have become unemployed, including those affected by the
COVID‑19 pandemic (pandemic).”).
21 House Committee on Oversight and Accountability Majority Staff, Examining Widespread Fraud in Pandemic
Unemployment Relief Programs (Sep. 10, 2024) (“House Committee Report”) at 13, https://oversight.house.gov/wp-
content/uploads/2024/09/UI-Report-FINAL.pdf (DX 14).
22 EDD’s Poor Planning, Jan. 2021 (DX 89) at 25 (“In March 2020, EDD halted most of its work related to
determining whether UI claimants were eligible for benefits.”).
23 EDD Annual Report, June 2021 (DX 16) at 7.
24 House Committee Report (DX 14) at 6, 23 (“The U.S. Government Accountability Office estimates that about 11
to 15 percent of total benefits paid during the pandemic were fraudulent, totaling between $100 to $135 billion.”).
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5.
Warnings from Regulatory Agencies and Law Enforcement
32. Recognizing the extent of the fraud resulting from the PUA and the vulnerability of
financial institutions, banking regulatory agencies and law enforcement issued warnings,
alerting banks to be vigilant in detecting fraud.

33. FinCEN issued nine separate warnings to banks between March 2020 and February 2021
directing banks to ensure they detected, prevented, and reported financial crimes related
to COVID-19-related payments, including one warning specifically addressing
unemployment insurance fraud.40 FinCEN encouraged banks to look for red flags
indicating fraud and to implement “innovative approaches to meet their BSA/anti-money
laundering compliance obligations, in order to further strengthen the financial system
against illicit financial activity and other related fraud.”41 Recognizing the extent of
criminal activity associated with COVID-19 relief, in February 2021, FinCEN provided

40 FinCEN Press Release, The Financial Crimes Enforcement Network (FinCEN) Encourages Financial Institutions
to Communicate Concerns Related to the Coronavirus Disease 2019 (COVID-19) and to Remain Alert to Related
Illicit Financial Activity (Mar. 16, 2020), https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-
network-fincen-encourages-financial-institutions (DX 92); FinCEN Press Release, The Financial Crimes
Enforcement Network Provides Further Information to Financial Institutions in Response to the Coronavirus
Disease 2019 (COVID-19) Pandemic (Apr. 3, 2020), https://www.fincen.gov/news/news-releases/financial-crimes-
enforcement-network-provides-further-information-financial (DX 92); FinCEN, Advisory on Medical Scams Related
to the Coronavirus Disease 2019 (COVID-19) (May 18, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-05-
18/Advisory%20Medical%20Fraud%20Covid%2019%20FINAL%20508.pdf (DX 92); FinCEN, Notice Related to
the Coronavirus Disease 2019 (COVID-19) (May 18, 2020),
https://www.fincen.gov/sites/default/files/shared/May_18_Notice_Related_to_COVID-19.pdf (DX 92); FinCEN,
Advisory on Imposter Scams and Money Mule Schemes Related to Coronavirus Disease 2019 (COVID-19) (July 7,
2020), https://www.fincen.gov/sites/default/files/advisory/2020-07-
07/Advisory_%20Imposter_and_Money_Mule_COVID_19_508_FINAL.pdf (DX 92); FinCEN, Advisory on
Cybercrime and Cyber-Enabled Crime Exploiting the Coronavirus Disease 2019 (COVID-19) Pandemic (July 30,
2020), https://www.fincen.gov/sites/default/files/advisory/2020-07-
30/FinCEN%20Advisory%20Covid%20Cybercrime%20508%20FINAL.pdf (DX 92); FinCEN, Advisory on
Unemployment Insurance Fraud During the Coronavirus Disease 2019 (COVID-19) Pandemic (Oct. 13, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-10-
13/Advisory%20Unemployment%20Insurance%20COVID%2019%20508%20Final.pdf (DX 92); FinCEN,
Consolidated COVID-19 Suspicious Activity Report Key Terms and Filing Instructions (Feb. 24, 2021),
https://www.fincen.gov/sites/default/files/shared/Consolidated%20COVID-19%20Notice%20508%20Final.pdf (DX
92); FinCEN, Advisory on Financial Crimes Targeting COVID-19 Economic Impact Payments (Feb. 24, 2021),
https://www.fincen.gov/sites/default/files/advisory/2021-02-24/Advisory%20EIP%20FINAL%20508.pdf (DX 92).
41 FinCEN Press Release, The Financial Crimes Enforcement Network Provides Further Information to Financial
Institutions in Response to the Coronavirus Disease 2019 (COVID-19) Pandemic (Apr. 3, 2020),
https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-provides-further-information-
financial (DX 92).
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15
banks with specific instructions for banks filing SARs based on COVID-19-related fraud-
types.42

34. In its Spring 2021 Semi-Annual Risk Perspective, the OCC, the Bank’s primary
regulator, instructed banks to be prepared to deal with new criminal typologies related to
the CARES Act.43 The OCC advised banks to “be diligent to appropriately monitor and
manage changes and associated risks [with respect to COVID-19], and ensure new
processes incorporated into their compliance and risk management programs are
effective.”44

35. In September 2020, the United States Department of Justice (“DOJ”) established the
National Unemployment Insurance Fraud Task Force. The intent was to marshal the
resources of the DOJ together with other state and federal agencies to combat and prevent
pandemic-related fraud.45 The Task Force noted that “[f]raudsters, some of which are
transnational criminal organizations, are

, exploiting the unprecedented
expansion of these benefits provided in response to economic disruption caused by the
COVID-19 pandemic.”46 The Task Force’s most recent report confirms the widespread
criminal activity relating to the issuance of COVID-related unemployment benefits; it
reported the arrests of more than 3,500 defendants, the seizure or forfeiture of over $1.4
billion in stolen COVID-19 relief funds, and the “ongoing investigations into hundreds of

42 See FinCEN, Advisory on Financial Crimes Targeting COVID-19 Economic Impact Payments (Feb. 24, 2021),
https://www.fincen.gov/sites/default/files/advisory/2021-02-24/Advisory%20EIP%20FINAL%20508.pdf (DX 92).
43 Office of the Comptroller of the Currency, Semiannual Risk Perspective from the National Risk Committee
(Spring 2021), at ii, 21, https://www.occ.gov/publications-and-resources/publications/semiannual-risk-
perspective/files/pub-semiannual-risk-perspective-spring-2021.pdf (DX 93).
44 Id. (DX 93) at 20.
45 U.S. Department of Justice, National Unemployment Insurance Fraud Task Force, Unemployment Insurance
Fraud Consumer Protection Guide (Sep. 21, 2020),
https://www.oig.dol.gov/public/Unemployment%20Insurance%20Fraud%20Consumer%20Protection%20Guide,%2
0Final.pdf (DX 95).
46 Id. (DX 95).
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.
VII.
MR. KREIS IGNORES THE REALITIES OF THE BANK’S POSITION
DURING UNPRECEDENTED CIRCUMSTANCES.
51. Plaintiffs have tendered the report of their expert, J. Daniel Kreis.92 Mr. Kreis bases his
report on how banks should address unauthorized transaction claims under ordinary
circumstances.93

.94 His
opinions do not account for the realities of the COVID-19 crisis, the explosion of
fraudulent unemployment benefits recipients in the EDD prepaid card program, or the
intentional abuse of the

. He
instead briefly acknowledges that he understands “that the Bank’s prepaid claims
operations faced elevated claims volume and other operational challenges during the
Class Period…”95 He suggests that the Bank could have easily addressed fraud issues
simply by prioritizing the investigation of high-dollar-value unauthorized transaction
claims, increasing the dollar threshold for auto-paying claims, and hiring more analysts.96
He wholly ignores that these were extraordinary and complex circumstances with
unprecedented fraudulent activity and the likelihood of rapidly increasing, substantial
losses requiring the Bank to act expeditiously. Indeed, the Bank was faced with an

89 Letson Deposition (DX 97) at 112:8–113:8.
90 31 C.F.R. § 1020.220.
91 31 C.F.R. § 1020.210.
92 Kreis Report, ¶ 1. See fn. 1, supra.
93 Id. at Section VII.
94 Id. at Sections VII.B and VII.C.
95 Kreis Report, ¶ 51.
96 Id. at ¶ 52.
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26
unprecedented number of unauthorized transaction claims –

– in a portfolio of cards that
was known to contain unverified individuals and fraudsters.97

52. Mr. Kreis contends that the Bank could have, but failed to, increase Claims Department
resources, suggesting that the Bank simply did not want to bear that expense.98

,99 and appears to suggest that the Bank could have easily added even
more resources, sufficient to manage the barrage of unauthorized transaction claims.100
Based on my experience in the industry, I disagree. Claims analysts are skilled workers
who must be trained to both engage in customer service and conduct potentially complex
investigations. Mr. Kreis acknowledges as much in his report.101 Locating and hiring
trained personnel to address the daunting volume of unauthorized transaction claims over
a short timeframe is simply unrealistic. The Bank could not have just hired masses of
workers from a temp agency.

53. Mr. Kreis also suggests that the Bank could have prioritized the investigation of higher-
dollar-value claims and “increase[ed] the monetary threshold at which low-dollar-value
claims are auto-paid without conducting an investigation . . . .”102 But he offers no
evidence that the automatic payment of lower dollar value claims would solve the
problem that the Bank was facing.

.103

97 Exhibit 2; Section V.4.
98 Kreis Report, ¶¶ 52–53.
99 Daniels Deposition (DX 98) at 102:20–103:17.
100 Kreis Report, ¶¶ 52–53.
101 Id. at ¶ 20.
102 Id. at ¶ 52.
103 See Sections V and VI.
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28
57.

.108

58. Based on my expertise and experience,

.109

59.

A
report issued by the House Committee on Oversight and Accountability noted a case
where even after EDD made a determination of suspicious fraudulent activity, it
continued to issue benefits to some of the fraudsters.111 The same report notes that, as of
April 2024, the Department of Justice has recovered only $1.4 billion of the more than
$191 billion of improperly paid pandemic unemployment insurance payments, and that
many of the criminals “will likely never even be apprehended.”112

108 See Memorandum of Points and Authorities in Support of Motion for Class Certification, In re: Bank of America
California Unemployment Benefits Litigation, Case No.: 3:21-md-02992-GPC-MSB (Aug. 29, 2024) at 3, citing
Regan Report ¶ 35 (emphasis added).
109

110 See Section V.3.
111 House Committee Report (DX 97) at 29.
112 House Committee Report (DX 14) at 74–75.
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Documents Considered List
Articles

Doug Clare, Falcon Intelligence Network: A Fraud Consortium for Fraud-Fighting
Machine Learning Innovation, FICO Blog (Mar. 26, 2021),
https://www.fico.com/blogs/falcon-intelligence-network-fraud-consortium-fraud-
fighting-machine-learning-innovation

F5, How Fraud Detection Works: Common Software and Tools,
https://www.f5.com/glossary/fraud-detection

FICO, FICO Falcon Fraud Manager, https://www.fico.com/en/products/fico-falcon-
fraud-manager

Mary Ann Milbourn, Unemployment Payouts Go Plastic in July, The Orange County
Register (Mar. 16, 2011), https://www.ocregister.com/2011/03/16/unemployment-
payouts-go-plastic-in-july/

Scott Zoldi, FICO Fights Prepaid Card Fraud with AI and Machine Learning, FICO
Blog (Mar. 9, 2020), https://www.fico.com/blogs/fico-fights-prepaid-card-fraud-ai-
and-machine-learning

Square, Making Change, Chapter 4: One Year of Payments and the Pandemic,
https://squareup.com/us/en/press/making-change/2021

TJ Horan, The Fraud Consortium: 9,000 Heads Are Better than 1, FICO Blog (Dec.
6, 2017), https://www.fico.com/blogs/fraud-consortium-9-000-heads-are-better-1
Depositions

Deposition of Shane Daniels, In re: Bank of America California Unemployment
Benefits Litigation, Case No.: 3:21-md-02992-LAB-MSB (Feb. 6, 2024)

Deposition of Robert A. Chestnut, In re: Bank of America California Unemployment
Benefits Litigation, Case No.: 3:21-md-02992-LAB-MSB (Feb. 8, 2024)

Deposition of William Matthew Martin, In re: Bank of America California
Unemployment Benefits Litigation, Case No.: 3:21-md-02992-LAB-MSB (Feb. 14,
2024)

Deposition of Michael Letson, In re: Bank of America California Unemployment
Benefits Litigation, Case No.: 3:21-md-02992-LAB-MSB (Feb. 16, 2024)

Deposition of William Golden, In re: Bank of America California Unemployment
Benefits Litigation, Case No.: 3:21-md-02992-LAB-MSB (Feb. 22, 2024)
APPENDIX A
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Expert Reports and Declaration

Appendix of Exhibits to the Declaration of Laura Brys in Support of Defendant’s
Opposition to Plaintiffs’ Motion for Class Certification

Expert Class Certification Report of Greg J. Regan, In re: Bank of America
California Unemployment Benefits Litigation, Case No.: 3-21-md-02992-GPC-MSB
(Aug. 29, 2024)

Expert Class Certification Report of J. Daniel Kreis, In re: Bank of America
California Unemployment Benefits Litigation, Case No.: 3:21-nd-02992-GPC-MSB
(Aug. 29, 2024)
Government Reports and Releases

Auditor of the State of California, Employment Development Department: EDD’s
Poor Planning and Ineffective Management Left it Unprepared to Assist Californians
Unemployed by COVID-19 Shutdowns (Jan. 2021),
https://information.auditor.ca.gov/pdfs/reports/2020-128and628.1.pdf

Board of Governors of the Federal Reserve System, FDIC, FinCEN, NCUA, OCC,
Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and
Other Anti-Money Laundering Considerations (Jan. 19, 2021),
https://www.fincen.gov/sites/default/files/2021-
01/Joint%20SAR%20FAQs%20Final%20508.pdf

Centers for Disease Control, Timing of State and Territorial COVID-19 Stay-at-Home
Orders and Changes in Population Movement – United States, March 1–May 31,
2020 (Sep. 4, 2020), https://www.cdc.gov/mmwr/volumes/69/wr/mm6935a2.htm

Congressional Research Service, Unemployment Rates During the COVID-19
Pandemic (Aug. 20, 2021), https://crsreports.congress.gov/product/pdf/R/R46554

EDD Strike Team, Employment Development Department Strike Team Detailed
Assessment and Recommendations (Sep. 16, 2020), https://www.govops.ca.gov/wp-
content/uploads/sites/11/2020/09/Assessment.pdf

Employment Development Department, State of California, Annual Report California
Fraud Deterrence and Detection Activities (June 2021),
https://edd.ca.gov/siteassets/files/about_edd/pdf/fraud_deterrence_and_detection_acti
vities_2021.pdf

Federal Financial Institution Examination Counsel Bank Secrecy Act/Anti-Money
Laundering Examination Manual (FFIEC Manual), Introduction, Role of Government
Agencies in the BSA (2021), https://bsaaml.ffiec.gov/manual/Introduction/01
APPENDIX A
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
Federal Trade Commission, When a Company Declines Your Credit or Debit Card,
Consumer Advice (Aug. 2022), https://consumer.ftc.gov/articles/when-company-
declines-your-credit-or-debit-card

FFIEC Manual, Assessing Compliance with BSA Regulatory Requirements, Customer
Identification Program (2021),
https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirem
ents/01

FFIEC Manual, Assessing Compliance with BSA Regulatory Requirements, Customer
Due Diligence, Overview (2018),
https://bsaaml.ffiec.gov/manual/AssessingComplianceWithBSARegulatoryRequirem
ents/02

FinCEN, What We Do, https://www.fincen.gov/what-we-do

FinCEN, Advisory on Cybercrime and Cyber-Enabled Crime Exploiting the
Coronavirus Disease 2019 (COVID-19) Pandemic (July 30, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-07-
30/FinCEN%20Advisory%20Covid%20Cybercrime%20508%20FINAL.pdf

FinCEN, Advisory on Financial Crimes Targeting COVID-19 Economic Impact
Payments (Feb. 24, 2021), https://www.fincen.gov/sites/default/files/advisory/2021-
02-24/Advisory%20EIP%20FINAL%20508.pdf

FinCEN, Advisory on Imposter Scams and Money Mule Schemes Related to
Coronavirus Disease 2019 (COVID-19) (July 7, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-07-
07/Advisory_%20Imposter_and_Money_Mule_COVID_19_508_FINAL.pdf

FinCEN, Advisory on Medical Scams Related to the Coronavirus Disease 2019
(COVID-19) (May 18, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-05-
18/Advisory%20Medical%20Fraud%20Covid%2019%20FINAL%20508.pdf

FinCEN, Advisory on Unemployment Insurance Fraud During the Coronavirus
Disease 2019 (COVID-19) Pandemic (Oct. 13, 2020),
https://www.fincen.gov/sites/default/files/advisory/2020-10-
13/Advisory%20Unemployment%20Insurance%20COVID%2019%20508%20Final.
pdf

FinCEN, Consolidated COVID-19 Suspicious Activity Report Key Terms and Filing
Instructions (Feb. 24, 2021),
https://www.fincen.gov/sites/default/files/shared/Consolidated%20COVID-
19%20Notice%20508%20Final.pdf

FinCEN, Notice Related to the Coronavirus Disease 2019 (COVID-19) (May 18,
2020),
APPENDIX A
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https://www.fincen.gov/sites/default/files/shared/May_18_Notice_Related_to_COVI
D-19.pdf

House Committee on Oversight and Accountability Majority Staff, Examining
Widespread Fraud in Pandemic Unemployment Relief Programs (Sep. 10, 2024),
https://oversight.house.gov/wp-content/uploads/2024/09/UI-Report-FINAL.pdf

Kelsey Coyle, et al., Consumer Payments and the Covid-19 Pandemic, Federal
Reserve Bank of San Francisco (Feb. 9, 2021), https://www.frbsf.org/wp-
content/uploads/sites/7/consumer-payments-covid-19-pandemic-2020-diary-
consumer-payment-choice-supplement-2.pdf

Letter from Elaine M. Howle, 2020-502 (Nov. 19, 2020),
https://information.auditor.ca.gov/pdfs/reports/2020-502.pdf.

Office of the Comptroller of the Currency, OCC Bulletin 2019-37: Operational Risk:
Fraud Risk Management Principles (July 24, 2019), https://www.occ.treas.gov/news-
issuances/bulletins/2019/bulletin-2019-37.html

Office of the Comptroller of the Currency, OCC Report Examines Key Risks, Effects
of COVID-19 Pandemic on Federal Banking System (Spring 2021),
https://www.occ.gov/publications-and-resources/publications/semiannual-risk-
perspective/files/semiannual-risk-perspective-spring-2021.html

Office of the Comptroller of the Currency, OCC Issues Cease and Desist Order,
Assesses $450 Million Civil Money Penalty, and Imposes Growth Restriction Upon
TD Bank, N.A. for BSA/AML Deficiencies (October 10, 2024),
https://www.occ.treas.gov/news-issuances/news-releases/2024/nr-occ-2024-116.html

Office of the Comptroller of the Currency, Acting Comptroller of the Currency
Michael J. Hsu Remarks for the Financial Literacy and Education Commission’s
Public Meeting (July 10, 2024), https://www.occ.treas.gov/news-
issuances/speeches/2024/pub-speech-2024-75.pdf

Office of the Comptroller of the Currency, Semiannual Risk Perspective from the
National Risk Committee (Spring 2021), https://www.occ.gov/publications-and-
resources/publications/semiannual-risk-perspective/files/pub-semiannual-risk-
perspective-spring-2021.pdf

Trump White House, Proclamation on Declaring a National Emergency Concerning
the Novel Coronavirus Disease (COVID-19) Outbreak (Mar. 13, 2020),
https://trumpwhitehouse.archives.gov/presidential-actions/proclamation-declaring-
national-emergency-concerning-novel-coronavirus-disease-covid-19-outbreak/

U.S. Department of Justice, COVID-19 Fraud Enforcement Task Force 2024 Report
(Apr. 2024), https://www.justice.gov/coronavirus/media/1347161/dl?inline
APPENDIX A
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
U.S. Department of Justice, National Unemployment Insurance Fraud Task Force,
Unemployment Insurance Fraud Consumer Protection Guide (Sep. 21, 2020),
https://www.oig.dol.gov/public/Unemployment%20Insurance%20Fraud%20Consum
er%20Protection%20Guide,%20Final.pdf

U.S. Department of Labor, Office of Inspector General, COVID-19: ETA and States
Did Not Protect Pandemic-Related UI Funds From Improper Payments Including
Fraud or From Payment Delays (Sep. 30, 2022),
https://www.oig.dol.gov/public/reports/oa/2022/19-22-006-03-315.pdf

U.S. Department of the Treasury, About the CARES Act and the Consolidated
Appropriations Act, https://home.treasury.gov/policy-issues/coronavirus/about-the-
cares-act

U.S. Government Accountability Office, GAO-22-105715: Significant
Improvements Are Needed to Ensure Transparency and Accountability for COVID-
19 and Beyond (Mar. 17, 2022), https://www.gao.gov/assets/gao-22-105715.pdf
Legal Codes

31 C.F.R. § 1020.210

31 C.F.R. § 1020.220

31 C.F.R. § 1020.320
Pleadings

Plaintiffs’ Revised Notice of Deposition of Defendant Bank of America, N.A.
Pursuant to Federal Rule of Civil Procedure 30(b)(6), In re: Bank of America
California Unemployment Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB
(Feb. 4, 2024)

Order Re Preliminary Injunction, Jennifer Yick, et al. v. Bank of America, N.A., Case
No.: 21-cv-00376-VC (May 17, 2021)

Preliminary Injunction, Jennifer Yick, et al. v. Bank of America, N.A., Case No.: 21-
cv-00376-VC (June 2, 2021)

Consent Order, In the Matter of: Bank of America, N.A., File No.: 2022-CFPB-0004
(July 14, 2022)

Consent Order, In the Matter of: Bank of America, N.A. Charlotte, North Carolina,
File No.: AA-ENF-2022-21 (July 14, 2022)

Order: (1) Granting in Part and Denying in Part Motion to Dismiss Master
Consolidated Complaint, [Dkt. 64]; (2) Granting in Part and Denying in Part Request
for Judicial Notice, [Dkt. 84-2]; and (3) Granting Request for Judicial Notice, [Dkt.
APPENDIX A
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90-1], In re: Bank of America California Unemployment Benefits Litigation, Case
No.: 21-MD-02992-LAB-MSB (May 25, 2023)

First Amended Master Consolidated Complaint, In re: Bank of America California
Unemployment Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB (June 13,
2023)

Confidential Mediation Statement of Defendant Bank of America, N.A., In re: Bank
of America California Unemployment Benefits Litigation, Case No.: 21-MD-02992-
LAB-MSB (Oct. 10, 2023)

Plaintiffs’ Mediation Statement, In re: Bank of America California Unemployment
Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB (Oct. 10, 2023)

Plaintiffs’ Reply Mediation Statement, In re: Bank of America California
Unemployment Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB (Oct. 30,
2023)

Confidential Reply Mediation Statement of Bank of America, N.A., In re: Bank of
America California Unemployment Benefits Litigation, Case No.: 21-MD-02992-
LAB-MSB (Oct. 30, 2023)

Bank of America’s Responses and Objections to Plaintiff Yick’s Fourth Set of
Interrogatories, In re: Bank of America California Unemployment Benefits Litigation,
Case No.: 3:21-md-02992-LAB-MSB (Jan. 2, 2024)

Bank of America’s Responses and Objections to Plaintiff Yick’s Fifth Set of
Interrogatories, In re Bank of America California Unemployment Benefits Litigation,
Case No.: 3:21-md-02992-LAB-MSB (Feb. 2, 2024), and Exhibit 11

Memorandum of Points and Authorities in Support of Defendant’s Motion to
Dissolve Preliminary Injunction, In re Bank of America California Unemployment
Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB (Feb. 29, 2024)

Order: (1) Granting Motion to Dissolve Preliminary Injunction, [Dkt. 225]; And (2)
Granting Motion to Seal, [Dkt. 246], In re: Bank of America California
Unemployment Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB (Apr. 3,
2024)

Bank of America’s First Set of Responses and Objections to Plaintiff Yick’s Seventh
Set of Interrogatories (Interrogs. 40-41 & 44-46), In re: Bank of America California
Unemployment Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB (Apr. 23,
2024)

Bank of America’s Second Set of Responses and Objections to Plaintiff Yick’s
Seventh Set of Interrogatories (Interrogs. 39 & 42), In re: Bank of America
California Unemployment Benefits Litigation, Case No.: 21-MD-02992-LAB-MSB
(Apr. 23, 2024)
APPENDIX A
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
Second Amended Master Consolidated Complaint, In re: Bank of America California
Unemployment Benefits Litigation, Case No.: 3:21-md-02992-GPC-MSB (July 16,
2024)

Memorandum of Points and Authorities in Support of Motion for Class Certification,
In re: Bank of America California Unemployment Benefits Litigation, Case No.:
3:21-md-02992-GPC-MSB (Aug. 29, 2024)
Press Releases

FinCEN Press Release, The Financial Crimes Enforcement Network (FinCEN)
Encourages Financial Institutions to Communicate Concerns Related to the
Coronavirus Disease 2019 (COVID-19) and to Remain Alert to Related Illicit
Financial Activity (Mar. 16, 2020), https://www.fincen.gov/news/news-
releases/financial-crimes-enforcement-network-fincen-encourages-financial-
institutions

FinCEN Press Release, The Financial Crimes Enforcement Network Provides Further
Information to Financial Institutions in Response to the Coronavirus Disease 2019
(COVID-19) Pandemic (Apr. 3, 2020), https://www.fincen.gov/news/news-
releases/financial-crimes-enforcement-network-provides-further-information-
financial

U.S. Department of Justice Press Release, COVID-19 Fraud Enforcement Task Force
Releases 2024 Report (Apr. 9, 2024), https://www.justice.gov/opa/pr/covid-19-fraud-
enforcement-task-force-releases-2024-report

U.S. Department of Labor Press Release, U.S. Department of Labor Announces New
Guidance to States on Unemployment Insurance Programs (Dec. 30, 2020),
https://www.dol.gov/newsroom/releases/eta/eta20201230-1
Bates Stamped Documents

BANA_EDD_MDL-00001312–30

BANA_EDD_MDL-00003887–911

BANA_EDD_MDL-00003912–37

BANA_EDD_MDL-00004535–80

BANA_EDD_MDL-00005509–45

BANA_EDD_MDL-00005546–60

BANA_EDD_MDL-00006482–535

BANA_EDD_MDL-00012738–9
APPENDIX A
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HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY


BANA_EDD_MDL-00012790

BANA_EDD_MDL-00019602–3

BANA_EDD_MDL-00019618–28

BANA_EDD_MDL-00028946–9

BANA_EDD_MDL-00057504–6

BANA_EDD_MDL-00057837–78

BANA_EDD_MDL-00077223

BANA_EDD_MDL-00077224–5

BANA_EDD_MDL-00080294–352

BANA_EDD_MDL-00087715–6

BANA_EDD_MDL-00088501–5

BANA_EDD_MDL-00088506–21

BANA_EDD_MDL-00090135–7

BANA_EDD_MDL-00090640–7

BANA_EDD_MDL-00090695–8

BANA_EDD_MDL-00090721

BANA_EDD_MDL-00100390

BANA_EDD_MDL-00100506–29

BANA_EDD_MDL-00100530–59

BANA_EDD_MDL-00100616–33

BANA_EDD_MDL-00100634–79

BANA_EDD_MDL-00100741–59

BANA_EDD_MDL-00102554–77

BANA_EDD_MDL-00104526–7

BANA_EDD_MDL-00107327–35

BANA_EDD_MDL-00125177–9

BANA_EDD_MDL-00125428–30

BANA_EDD_MDL-00125919
APPENDIX A
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10984
Page 40 of 49

HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY


BANA_EDD_MDL-00125920–3

BANA_EDD_MDL-00129437–40

BANA_EDD_MDL-00154700–8

BANA_EDD_MDL-00159469

BANA_EDD_MDL-00159470–4

BANA_EDD_MDL-00163307–8

BANA_EDD_MDL-00181896.

BANA_EDD_MDL-00205361

BANA_EDD_MDL-00218256

BANA_EDD_MDL-00225047–8

BANA_EDD_MDL-00225867

BANA_EDD_MDL-00228914–5

BANA_EDD_MDL-00273305–7

BANA_EDD_MDL-00297295

BANA_EDD_MDL-00406128–30

BANA_EDD_MDL-00411205

BANA_EDD_MDL-00417487–90

BANA_EDD_MDL-00450516–8

BANA_EDD_MDL-00452826–7

BANA_EDD_MDL-00455617–9

BANA_EDD_MDL-00510141

BANA_EDD_MDL-00510142–7

BANA_EDD_MDL-00510148

BANA_EDD_MDL-00517105–26

BANA_EDD_MDL-00556122

BANA_EDD_MDL-00556152

BANA_EDD_MDL-00556324

BANA_EDD_MDL-00556536–7
APPENDIX A
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10985
Page 41 of 49

HIGHLY CONFIDENTIAL – ATTORNEYS’ EYES ONLY


BANA_EDD_MDL-00558991

BANA_EDD_MDL-00558996

BANA_EDD_MDL-00559094

BANA_EDD_MDL-00559101

BANA_EDD_MDL-00559693–980

BANA_EDD_MDL-00570333–4

BANA_EDD_MDL-00571307–10

BANA_EDD_MDL00571310

BANA_EDD_MDL-00572766–70

BANA_EDD_MDL-00592192–4

BANA_EDD_MDL-00592324–30

BANA_EDD_MDL-00630008–9

BANA_EDD_MDL-00718756–70

BANA_EDD_MDL-00720087–90

BANA_EDD_MDL-00881823–8

BANA_EDD_MDL-00884198

Moore_S_0000367

Note: Even if not included in this list, I also considered any documents cited in my
Declaration.
APPENDIX A
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10986
Page 42 of 49

1
Teresa A. Pesce
Financial Crimes Subject Matter Expert
(914) 602-4103, terry@terrypesceco.com
_____________________________________________________________________________________________
Professional Summary
Teresa (Terry) Pesce is an industry leader and Subject Matter Expert in Financial Crimes regulatory enforcement and
compliance. She has a demonstrated history of working in and with the financial services industry in both an advisory and
expert capacity. Her background includes experience in government, industry, and consulting. She has led large teams and
managed significant projects, and she has designed and implemented financial crimes compliance programs and
organizational structures.
Prior to establishing her independent consulting firm, Terry spent 13 years as a Principal in KPMG’s Forensic Advisory Services,
serving as Global Head of Anti-Money Laundering (AML) and Head of the firm’s Financial Crimes Solution. Terry has
spearheaded engagements for financial institutions addressing numerous financial crimes and sanctions issues. She has
assisted clients facing regulatory enforcement actions, both private and public. She has often been asked to report directly to
law enforcement agents and prosecutors, regulatory agencies, Boards of Directors, and senior management.
Before joining KPMG, Terry was Executive Vice President and AML Director for HSBC North America. She joined the bank to
build out the AML compliance function for all business lines in response to a regulatory order imposed in 2003 and lifted by
the OCC during her tenure in 2006.
Prior to joining HSBC, Terry was an Assistant United States Attorney in the Southern District of New York, serving as Chief of
the Major Crimes Unit, and Deputy Chief of the Criminal Division. From 1999 through 2003, Terry was responsible for
supervision and oversight of all money-laundering and tax prosecutions and worked closely with law enforcement and the
financial regulatory agencies responsible for oversight of AML enforcement. During her tenure at the US Attorney’s office, she
investigated and prosecuted numerous cases involving and charging money laundering.
Terry holds a BA from Columbia University, where she graduated magna cum laud, Phi Beta Kappa, and she holds a JD from
Columbia Law School, where she served as Managing Editor of the Law Review and received prizes in Constitutional Law and
Trial Advocacy. She is a recognized industry speaker and has published numerous pieces on financial crimes and enforcement.
Professional and Industry Experience
•
President and CEO, Terry Pesce & Co LLC
October 2020 to present
Terry provides legal and consulting services to the financial services industry, including assisting clients in the
organizational design of financial crimes compliance programs, assisting with regulatory and enforcement matters,
and advising senior management and Boards of Directors on financial crimes matters. She provides expert witness
services in the areas of financial crimes compliance and enforcement. Examples of recent matters include the
following:
•
Terry has provided expert witness and consulting services in connection with a variety of complex civil
litigation and enforcement matters involving, for example, money laundering, sanctions enforcement, fraud,
human trafficking, compliance, and financial industry practices. (See page 6 for representative
engagements.)
•
Terry has been retained by large financial services companies to advise senior leadership and Boards of
Directors with respect to the effectiveness of regulatory responses, remedial actions, and program changes
undertaken in response to enforcement actions and regulatory expectations.
APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10987
Page 43 of 49

•
Terry has assisted a financial institution in the preparation of a response and reports to the Department of
Justice in connection with a criminal enforcement action.
•
Terry has designed the AML framework for a start-up FinTech company.
•
Terry has assisted in designing the AML program for a de novo bank.
•
Terry has advised a Private Equity fund on financial crimes risk and processes.
•
Terry has served as legal counsel in a civil matter alleging financial crimes.
•
Terry has been retained to assist counsel with the financial-crimes component of a FinTech’s independent
compliance assessment.
•
Terry has performed gap analyses of financial crimes compliance programs against legal and regulatory
standards and against industry best practices.
•
Terry is assisting a financial institutions with enhancing its anti-money laundering controls in response to
regulatory findings.

•
Adjunct Professor, Case Western School of Law, Masters in Financial Integrity Program
July 2020 to December 2021
Terry taught in a global program focusing on topics relevant to financial crimes, financial crime prevention, and
criminal law related subjects, including sessions on human trafficking.

•
Principal, KPMG LLP Forensic Advisory Services, Head of Anti-Money Laundering/Financial Crimes Practice
April 2007 – September 2020
Terry served as Global Head of AML Services and Head of Financial Crimes Solutions in the US. As leader of the AML
service line, Terry led numerous engagements, assisting a variety of financial institutions in addressing AML and
sanctions issues, both proactively and reactively.
Representative Project/Engagement Experience
•
Assisted a global financial institution under regulatory order in enhancing its overall BSA/AML program,
including by conducting a gap analysis of the then existing program, recommending and assisting in the
design of enhancements to all required program components. The project also required conducting a
transaction review of correspondent banking for suspicious activity.
•
Assisted a global financial institution under investigation for potential sanctions violations. Assistance
included presentation to the Department of Justice, NYS Department of Financial Services and the Federal
Reserve Bank.
•
Assisted a global broker dealer with an investigation of transactions for suspicious activity, including by
presenting to the SEC and FINRA.
•
Assisted a global financial institution in connection with the assessment and revision of its global AML
Target Operating Model. Terry assisted with BSA/AML program enhancements to the markets division of
this institution in the US by designing and implementing of AML and OFAC risk assessments; the
implementation of tactical transaction monitoring; systems testing for sanctions and information sharing;
and by performing a customer file remediation.
•
Assisted a global financial institution in the creation and implementation of an AML Compliance risk self-
assessment program for roll out across all business lines, measuring for risk against regulatory requirements
and expectations. The work involved the measuring of risks and the assessment of internal controls to
measure residual risk to the institution.
•
Assisted a global broker dealer in a KYC remediation of a complex client portfolio migrating from an
unregulated entity to a bank in connection with the institution’s transition to a bank holding company.
APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10988
Page 44 of 49

•
Assisted a global bank/broker dealer in a customer KYC remediation for both institutional and private wealth
clients to ensure information on file met customer information, customer due diligence and enhanced due
diligence requirements.
•
Assisted a global financial institution operating under a regulatory order in conducting a transaction
lookback for cash and suspicious activity, including engaging in regular regulatory reporting. This matter
involved extensive work with banking regulators.
•
Assisted a global financial institution/MSB by leading a transaction review in connection with the sale of
monetary instruments; in the creation of AML policies and investigative procedures; and in the analysis of
product specific risks in several high-risk jurisdictions globally.
•
Assisted a global MSB/payment processer by conducting an independent gap analysis of its AML program for
compliance with regulatory requirements, regulatory guidance, and industry standards. Terry additionally
assisted in the review of transaction monitoring processes for capturing suspicious activity and in the review
of the suspicious activity reporting process.
•
Assisted a global MSB in connection with its credit card offering to high-net worth individuals by testing the
AML/KYC program in the private banking business.

•
Executive Vice President/Managing Director for Anti-Money Laundering for HSBC North American Holdings, including
HSBC Bank, USA, N.A.; HSBC Securities, Inc., and HSBC Finance Corporation.
September 2003 – March 2007
Terry built out the AML compliance function for all business lines in response to a regulatory order imposed in 2003
and lifted by the OCC during her tenure in 2006. Responsibilities included management and oversight of teams
responsible for the creation and maintenance of policies and procedures; testing; training; investigative/financial
intelligence programs; transaction monitoring; OFAC/sanctions compliance; and business line AML compliance. Terry
served as the primary contact for the bank’s regulators (the FRBNY, OCC inter alia) during all AML-related
examinations.

•
Assistant United States Attorney, Southern District of New York. Positions included Chief of the Major Crimes Unit,
Deputy Chief of the Criminal Division and Senior Trial Counsel.
August 1992 – September 2003
Terry was responsible for the investigation and prosecution of numerous criminal cases ranging from white collar
offenses to narcotics and violent crimes. As Chief of the Major Crimes Unit, Terry supervised the prosecution of
primarily white-collar crimes including, bank fraud, money laundering, wire fraud, tax fraud, investment fraud and
computer crimes. For the last five years of her tenure at the U.S. Attorney’s Office she was the supervisory attorney
on all money laundering and criminal tax matters, reviewing all cases and ultimately providing the final authorization
for the filing and prosecution of such cases within the district. Terry tried numerous criminal cases, including those
charging money laundering.

•
Litigation Associate, Fried, Frank, Harris, Shriver & Jacobson
December 1988 – August 1992

•
Law Clerk, Hon. Robert W. Sweet, United States District Judge, S.D.N.Y.
October 1987 – October 1988

APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10989
Page 45 of 49

Education
•
Columbia University School of Law, New York, NY, JD 1987
•
Columbia Law Review, Managing Editor
•
Harlan Fiske Stone Scholar
•
James A. Elkins Award in Constitutional Law
•
Whitney North Seymour Award in Trial Advocacy

•
Columbia University, New York, NY, BA 1984
•
Magna cum laude
•
Phi Beta Kappa
•
Honors History
Speaking Engagements and Publications
Speaking engagements
Terry is frequently called upon to speak at industry conferences and forums regarding Financial Crimes and regulatory
compliance, as well as the current regulatory landscape, including for the following organizations:
•
American Bankers’ Association
•
American Bar Association
•
ACAMS
•
The Institute for International Research
•
Institutional Investor
•
New York State Society of CPAs
•
Securities Industry and Financial Markets Association (SIFMA)
•
Institution for International Bankers
•
Association of the Bar of the City of NY
•
Association of Certified Sanctions Specialists
Terry has served as a panelist for the New York State Banking Department (now the Department of Financial Services)
conference on money laundering legislation and reporting requirements as applied to money remitters and other non-bank
financial institutions; and participated in post-9/11 Clearing House panels on detecting terrorist financing.
While in industry, Terry was a member of the Clearing House AML and OFAC Committees, as well as a member of the
Subcommittee on Cover Payments.
Terry also participated in the World Bank’s Global Dialogue Series and attended meetings of the Wolfsberg Group and a UN
Committee dedicated to combating terrorist financing.
Publications and Thought Leadership
The New Era of Regulatory Enforcement, Chapter 4, Money Laundering (Girgenti & Hedley 2016)
Managing the Risk of Fraud and Misconduct, Chapter 4, Money Laundering & Trade Sanctions (Girgenti & Hedley 2011)

ABA Bank Compliance – Intelligent Automation in Financial Crimes Compliance: We can’t have a failure to innovate
Article written by Tom Keegan, Terry Pesce and Stephen Marshall
https://advisory.kpmg.us/content/dam/advisory/en/pdfs/aba-aml-article-feb-2018.pdf

APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10990
Page 46 of 49

Reuters
Coming Clean About Data Analytics in the Anti-Money Space, Nov. 2018
Q&A with Terry Pesce on using Artificial Intelligence in fighting financial crime
https://blogs.thomsonreuters.com/answerson/coming-clean-about-data-analytics-in-the-anti-money-laundering-space/

Risk Intelligence
Discussing the use of technology to improve sanctions compliance:
http://www.garp.org/#!/risk-intelligence/culture-governance/compliance/a1Z1W000003fBo4UAE

RESPA News
Article quotes Terry Pesce and Greg Matthews discussing third-party risk and AML compliance issues within the mortgage
industry:
http://www.respanews.com/RN/ArticlesRN/AML-thirdparty-oversight-hold-similarities-71171.aspx.


Wrote American Banker guest article: Regulators Foster De-Risking More Than They Admit

Terry Pesce quoted in Wall Street Journal article: Treasury Scrutinizes Credit Unions

Terry Pesce quoted in American Banker article: Banks Feat Iron-Fisted Answer to De-risking Dilemma

Terry Pesce quoted in Wall Street Journal article: Banks, Regulators Reach Impasse Over Risky Account Closures

Terry Pesce quoted in Wall Street Journal article: Steering Clear of Sanctions

Intelligent automation in financial crimes: Forging an innovative compliance strategy for the future
https://advisory.kpmg.us/content/kpmg-advisory/risk-consulting/forensics/financial-services/intelligent-automation-in-
financial-crime.html

The future of financial crime: Comply. Integrate. Automate
https://advisory.kpmg.us/content/dam/advisory/en/pdfs/future-of-financial-crime.pdf

Building an effective financial crimes change management program: How financial institutions can keep up with global
regulatory change
https://advisory.kpmg.us/content/dam/advisory/en/pdfs/building-an-effective-financial-crimes-change-managemnet-
program.pdf

Under one agile umbrella: An approach to managing financial crimes risk
https://advisory.kpmg.us/content/dam/advisory/en/pdfs/under-one-agile-umbrella.pdf

Financial Crimes, A Paradigm Shift, December 2022
Contributor
http://bit.ly/3GX0FhF

Videos
Terrorist Financing and Anti-Money Laundering Regulation
Teresa Pesce of KPMG Forensic discusses the new era of anti-money laundering (AML) and terrorist financing regulatory
enforcement that began following 9/11. This extends far beyond the original intent of the USA PATRIOT Act and is something
that both the government and the financial services industry needs to pay attention to.

Webcasts

AML Hot Topics: More Updates to the FFIEC Exam Manual
With AML RightSource
https://vimeo.com/530014556

APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10991
Page 47 of 49

2021 Regulatory Sanctions Update – Challenges, Considerations, and Pathways
June 23, 2021

What’s New for 2022
With AML RightSource

The Value of FATF to Your Financial Crime Compliance
July 27, 2023
https://www.amlrightsource.com/news/aml-voices-the-value-of-fatf-to-your-financial-crime-
compliance?utm content=261543986&utm medium=social&utm source=linkedin&hss channel=lcp-2477367

Podcasts

Financial Crimes – Dirty Money Stories
With AML RightSource
https://vimeo.com/543213606

Interagency Guidance on Third Party Risk Management
With AML RightSource

Expert Witness Experience
•
Blue Flame Medical LLC v. Chain Bridge Bank, NA, John J. Brough, and David M. Evinger; Chain Bridge Bank, NA v
JPMorgan Chase Bank, NA, Civil Action No. 1:20-cv-00658 (LMB/IDD) (E.D. Va. 2021).
o
Provided expert report and testimony on behalf of JPMorgan Chase Bank, NA
•
Entesar Omar Kashef, et al. v. BNP Paribas, S.A., et al., Case 1:16-cv-03228-AKH (S.D.N.Y.).
o
Provided expert report and testimony on behalf of BNP Paribas, S.A.
•
Government of the United States Virgin Islands v. JPMorgan Chase Bank, N.A., Case No. 1:22-cv-10904-JSR (S.D.N.Y.)
o
Provided expert report and deposition testimony on behalf of JPMorgan Chase Bank, NA
•
Terry provided an expert report on behalf of three global financial institutions in a litigation filed in a foreign jurisdiction.
•
Terry is providing expert services to an international financial institution in connection with a pending AML investigation
and potential enforcement action.
•
Terry is providing expert services to two global financial institutions in connection with pending civil litigations involving
Ponzi schemes.
•
Terry is providing expert services to a global financial institution in connection with a pending civil litigation involving
fraud controls.

Relevant Coursework
•
Certificate in Human Trafficking Training from the Polaris Project.

APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10992
Page 48 of 49

Awards & Recognition

ACQ5 Gamechanger Awards 2023
•
Terry Pesce & Co LLC – International Financial Crimes Service Provider of the Year
•
Terry Pesce – International AML Expert of the Year

During Terry’s tenure as Head of AML/Financial Crimes, KPMG won numerous awards from industry publications as the
AML Firm of the Year globally and or nationally including:
•
Finance Monthly
•
Lawyer International
•
ACQ 5
•
M&A Monthly

Teresa Pesce named International Game Changer of the Year in the field of Anti-Money Laundering by ACQ 5:
•
2015, 2016, 2017, 2020

Directors Award for Superior Performance as an Assistant United States Attorney

US Department of Justice, 1998

Professional Associations
• New York State Bar Association
• American Bankers Association, Associate Member
• Member of the American Bankers/Bar Association, FC Enforcement conference board 2014-2020; Terry continued to serve
as a moderator and/or panelist at this conference, most recently in January 2022.

Bar Admissions
New York State Appellate Division, First Department
United States District Courts: SDNY, EDNY

APPENDIX B
Case 3:21-md-02992-GPC-MSB Document 350-3 Filed 10/24/24 PageID.10993
Page 49 of 49

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Expert Declaration of Teresa A. Pesce (Exhibit 2) — In re Bank of America California Unemployment Benefits Litigation (Dkt. 350-3, S.D. Cal. No. 3:21-md-02992)

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