Aziz Rahman of business crime solicitors Rahman Ravelli asks whether two pieces of breaking news indicate that banks see heavy fines for wrongdoing as no more than the price of doing their work.
The Financial Conduct Authority (FCA) is reported to have fined Standard Chartered bank £102.2 million over business carried out by its London branch with banks from outside the European Economic Area. The fine is unlikely to have come as a shock to Standard Chartered, as its interim 2018 report stated that it expected to pay a 'hefty' fine to the FCA for violating financial crime rules.
And as the Standard Chartered news was breaking, a French court found UBS AG and UBS (France) SA guilty of illicit solicitation and laundering the proceeds of tax fraud. The court issued penalties and civil damages that came to almost 4.5 billion euros. UBS has said it disagrees with the verdict, which comes ten years after UBS it paid US authorities $780 million over tax evasion issues as part of a 2009 deferred prosecution agreement.
But while both banks are now facing the prospect of paying huge fines it is worth noting that Standard Chartered was fully expecting to pay. And even though UBS may appeal the court's decision, it is not the first time it has been saddled with a huge fine for tax offences. Which begs the question – are the big financial institutions simply regarding massive fines as little more than the cost of doing business? Do they see fines as a routine operational cost? And if that is the case, do we have to consider whether fines are truly a deterrent?
After all, if the banks are paying these fines without appearing to flinch maybe the process is failing to have the effect it is supposed to, which is to keep the banks in line.
And while we do not yet know for sure if employees of either Standard Chartered or UBS are to face charges in relation to either of these cases, it would be interesting to see if the authorities would deal with individuals by simply imposing a fine; especially if they were repeat offenders.
We seem to have a situation, therefore, where the banks keep paying the fines but the behaviour that prompted them doesn't really seem to be going away. And that has to be a concern for the authorities. If we take the Libor rigging scandal, we have seen individuals charged, convicted and banned from the financial industry in certain countries. Yet only the option of fines has been imposed on the banks who have been found to be responsible. And yet, from what we know, fining the banks appears to be the far from effective option.
So do we need to reassess how financial wrongdoing is dealt with on an institutional and / or individual level?
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