Banks Take It On The Chin

by Michael Volkov

bank enforcementThe end of the year was very tough for global banks.  For months significant enforcement actions were expected in the ongoing LIBOR manipulation probe and anti-money laundering and sanctions violations probes.

This was not a year of FCPA enforcement – it was a year in which anti-money laundering, sanctions and LIBOR dominated the enforcement scene.  Banks have typically been “safe” from aggressive enforcement as long as they pleased their regulators – the OCC, the FDIC and/or the Federal Reserve.  That has changed significantly.  The Obama Administration has made prosecuting the financial industry a top priority – partly in response to public demands and partly in response to its own concerns about the financial meltdown in 2008 and 2009.

For banks – big and small – this trend is going to continue for at least the next few years.  Compliance programs which satisfied the regulators in the past now have to be re-examined and measured against a higher standard, one which will satisfy tougher enforcement standards.

Prosecutors are now focused on three specific areas: anti-money laundering compliance, sanctions enforcement and LIBOR rate manipulation.


UBS settled with US, UK, Japan, and Switzerland authorities for LIBOR price fixing and manipulation.  More significant enforcement actions are expected in the LIBOR investigation.  Twenty additional banks are under investigation.imagesCA5TMK7B

UBS’ United States subsidiary was not required to plead guilty out of fear that it would lose its banking license.  Two former UBS senior traders were charged with criminal conspiracy in Manhattan federal court.

The UBS DPA includes stringent compliance requirements, including firewalls to prevent improper communications between traders and other staff submitting LIBOR rate information.  The DPA also requires UBS to improve document preparation and retention procedures, and new auditing, monitoring and training measures.

The LIBOR price fixing scandal will have significant private litigation implications.  The UBS deal will provide valuable ammunition for dozens of lawsuits filed in U.S. courts against banks by aggrieved customers, investors and others, seeking billions of dollars for antitrust violations.

AML and Sanctions

Standard Chartered settled for $327 million for sanctions violations; and HSBC settled a long-running probe for $1.9 billion for AML and sanctions violations.

The HSBC settlement rekindled controversy around the Deferred Prosecution Agreement which included no criminal charges against HSBC or any individuals.

Compliance Implications

It is easy to dismiss the recent banking enforcement actions, citing the fact that bank officers and employees acted deliberately to flout known LIBOR, AML and sanctions restrictions and requirements.  In many cases, rules were deliberately ignored.  Due diligence requirements were ignored and quickly checked off despite serious problems and deficiencies identified in the review of transactions.  In fact, the systematic breakdowns in the cases reflect a total disregard for compliance and supervisory instances of neglect and deliberate indifference.

imagesCA87ZV99The culture of ignorance started small and quickly grew as the companies became more accepting of unethical and illegal conduct.  It is easy to do that as the company makes more money and feels rewarded by its performance.

Companies which face these large prosecutions have significant future challenges.  Deferred Prosecution Agreements have been imposed and stringent compliance regimes have to be put in place.  For some companies, this is the only way change can be implemented.  Senior management is often replaced and a new crew of managers takes over.

These financial companies have had to and will be forced to increase compliance spending by millions of dollars, establish new global supervision and compliance offices, revamp their internal compliance and auditing protocols, fire third-parties implicated in the course of violations, and spend millions on remedial measures.

It will take years for these companies to right their ships.  They have to implement new global compliance policies, screen their operations and transactions more carefully, and continue to cooperate with regulatory and law enforcement authorities.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Michael Volkov, The Volkov Law Group | Attorney Advertising

Written by:

Michael Volkov

The Volkov Law Group on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.