The Justice Department will credit robust compliance but won’t shy from targeting banks that fail to curb criminal conduct, Deputy Attorney General James M. Cole said today in Washington D.C.
James Cole
“Labeling certain behavior ’shameful’ after being caught is simply too little, too late,” Cole said according to prepared remarks delivered at a money laundering enforcement conference sponsored by the American Bar Association and the American Bankers Association.
Cole notes that financial institutions have paid $17 billion in settlements to the U.S. government this year alone.
Recently, the Justice Department has secured major resolutions involving five financial institutions over manipulation of the LIBOR benchmark interest rate, leading to $3.7 billion in payments across the government.
“During our investigation, it became apparent that certain institutions condoned a culture of illegal behavior,” Cole said, according to his prepared remarks.
Settlements have been secured with Rabobank, Barclays, UBS and RBS. Prosecutors have also charged two senior traders at UBS and three former brokers at ICAP.
The LIBOR investigation is ongoing, and Cole said investigators are also looking into manipulation of foreign exchange rates.
Because of the massive size of the global financial system, Cole said even small fraud related to rates and fees can lead to billions being illegally diverted.
At the same time, Cole said compliance — never a “money-maker” — may not be seen by banks as fitting into a fast-moving financial culture.
Establishing an emphasis on compliance throughout an organization is crucial to stopping bad conduct – and something the Justice Department considers when deciding how to prosecute and resolve cases.
In negotiations, Cole said companies argue that they take steps to set the right compliance tone high in organizations.
“But based on what we have seen, we cannot help but feel that the message is not getting through often enough or clearly enough,” Cole said.
The Justice Department is targeting companies for violations of the Bank Secrecy Act and sanctions violations under the International Emergency Economic Powers Act.
As an example of the credit companies get for stressing compliance, Cole points to the prosecution declination Morgan Stanley received last year, even though Garth Peterson, a former real estate managing director in China, pleaded guilty to violating the Foreign Corrupt Practices Act.
The decision not to prosecute, Cole said, stems from Morgan Stanley’s “robust and active compliance program.”
Companies hoping to receive similar treatment will have to put an emphasis on compliance.
“But where we do not see such exemplary conduct,” Cole said, “we must – and we will – use all of the tools available to us to hold banks answerable for their crimes.”
