[November 19, 2013]WASHINGTON (AP) — Admonishing the
nation's bankers, the Justice Department's No. 2 official says too
many financial institutions have failed in their duty to ensure that
their businesses are run cleanly.
"Despite years of admonitions by government officials that
compliance must be an important part of a corporation's culture, we
continue to see significant violations of law at banks, inadequate
compliance programs, and missed opportunities to prevent and detect
crimes," said Deputy Attorney General James Cole.
Cole said that "too many bank employees and supervisors value coming
as close to the line as possible, or even crossing the line" as
signs of being competitive or aggressive. "And we are troubled that
many employees believe that their supervisors, including in some
cases corporate management, actually want them to behave this way."
Cole's remarks come amid an international probe by the Justice
Department and other law enforcement agencies here and abroad into
possible manipulation of foreign exchange rates at a number of
financial institutions.
"You will be hearing more about these investigations in the future,"
Cole promised in regard to the investigation of banks both in the
U.S. and abroad.
Citigroup, JPMorgan Chase & Co., Barclays PLC, UBS AG and Deutsche
Bank AG have revealed they are the subjects of an investigation into
possible manipulation of currency trades. In the same probe, HSBC
PLC, Europe's biggest bank by market value, disclosed that the
Financial Conduct Authority, the British regulator, is investigating
its trading on the foreign exchange market.
Cole received a polite reception from members of the American
Bankers Association and the American Bar Association at the
conference, which dealt with enforcement of laws against money
laundering.
Now in his fifth year in the job, Cole's boss, Attorney General Eric
Holder, has come in for strong criticism because the government has
failed to bring criminal cases against major Wall Street bankers in
the wake of the financial crisis. In a tentative civil settlement
with the government, JPMorgan has agreed to pay $13 billion — $6
billion to compensate investors, $4 billion to help struggling
homeowners and the remainder as a fine. A criminal probe of JPMorgan
is pending.
In a blunt reference to conduct by some of the nation's biggest
banks, Cole said "too many supervisors seem to incentivize excessive
risk-taking — knowing that risky products can be unloaded down the
road, or anticipating that they will have left for another bank by
the time such risks are played out, leaving someone else to deal
with the consequences." In the run-up to the financial crisis of
2008, Goldman Sachs, Citigroup, JPMorgan and others were all
involved in sales of low-quality, high-risk securities linked to
mortgages that later collapsed in value.
The currency-trading probe echoes in complexity the ongoing
investigation into manipulation of the London interbank offered
rate, or LIBOR. LIBOR underpins trillions of dollars in transactions
around the world. The financial world was shaken when it emerged
that banks — including Royal Bank of Scotland, Barclays and UBS —
were submitting false data to gain market advantages.
Over $3.7 billion in penalties have been paid in LIBOR settlements
with Rabobank, Barclays, UBS, RBS, and the brokerage firm ICAP. So
far, the Justice Department has filed criminal charges against five
people — two former senior traders at UBS, and three former brokers
at ICAP.
"Our investigation of LIBOR is far from over," Cole said.
