The US Federal Reserve is probing Marcus, Goldman Sachs’ digital consumer business, reported the Wall Street Journal, citing undisclosed sources. 

The sources familiar with the development told the publication that the regulator is concerned that the bank’s consumer business lacked adequate monitoring and control procedures as it expanded.

The Fed is investigating to see if it has been properly monitoring Marcus and to see if there are any management or governance issues, the sources said, adding that instances of customer harm are also being probed, including whether they were effectively remedied.

As per the report, the investigation includes the audit, legal, and compliance departments of the Wall Street bank. 

The probe began as a standard Fed review in 2021 and led to an investigation last year, the sources told the publication.

In September 2022, Bloomberg reported that the Fed was reviewing the operations of Marcus.

In a statement to Reuters, a Goldman Sachs representative said: “The Federal Reserve is our primary federal bank regulator and we do not comment on the accuracy or inaccuracy of matters relating to discussions with them.” 

Goldman Sachs’ credit card business is also under investigation by the Consumer Financial Protection Bureau (CFPB).

The development comes as the lender scales back its consumer banking operations. It is no longer providing consumer loans and has shelved plans to widely offer checking accounts.

A large portion of Marcus is being merged into the lender’s new asset and wealth management division.

Earlier this month, Goldman Sachs revealed that its consumer banking and technology lost around $3bn in pre-tax earnings since 2020.