The Federal Bureau of Investigation has launched a probe into pricing practices within American Express Co.’s foreign-exchange unit, according to people familiar with the matter.
The investigation, which is being run out of the FBI’s Washington field office, is in its early stages and is focused on whether the foreign-exchange international payments department misrepresented pricing to clients in order to win their business, the people said.
The FBI began its investigation in August, the people said, after The Wall Street Journal, citing current and former employees, reported that AmEx’s foreign-exchange unit had recruited business clients with offers of low currency-conversion rates before raising prices without warning.
An AmEx spokeswoman declined to comment on the FBI investigation. In July, Amex said it took the allegations very seriously and would conduct a review. The unit’s employees have been instructed to avoid deleting emails, people familiar with the instructions said.
The FBI is in the fact-gathering stage of the investigation, the people familiar with the matter said. The bureau is communicating with AmEx and is waiting for the company to answer a list of questions, they said.
The Office of the Comptroller of the Currency also is looking into how AmEx disclosed pricing to customers, including what the customers were told about potential rate increases and who knew about the practice within the company, according to a person familiar with the inquiry. AmEx declined to comment on the OCC.
On July 30, the Journal reported that AmEx’s foreign-exchange international payments department routinely increased conversion rates without notifying customers, to boost revenue and employee commissions. The practice occurred until early this year and dated back to at least 2004, current and former employees told the Journal.
AmEx’s forex business, which largely serves small and midsize businesses, accounts for less than half of a percentage point of the company’s total revenue.
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Sales representatives would approach potential customers with an offer to beat the prices they were paying banks or other financial institutions to convert currency and send money abroad, according to current and former employees. The representatives didn’t inform customers that the margin, a markup that AmEx adds to the base currency exchange rate, was subject to increase without notice, they said.
Employees in the unit would later increase the margin without telling customers, the current and former employees said.
Managers instructed sales representatives to keep the details of the payment arrangements vague when speaking with potential customers and to avoid putting pricing terms in writing, the current and former employees said.