15 Compliance Fines: Noteworthy Penalties Exceeding $1 Billion
15 Compliance Fines: Noteworthy Penalties Exceeding $1 Billion. The financial sector has its fair share of dubious behaviour, just like any other industry. Fortunately, regulatory supervision and the fines that go along with it for infractions, non-compliance, and even fraud exist to keep financial institutions in check. Additionally, the amount of fines has increased to startling heights. Let’s examine the largest fines and infractions related to compliance during the last ten years.
Bank Fines: The 15 Biggest Compliance Fines
Now and then, certain banks become overly enthusiastic about inflating their accounting records. When this occurs, it might be considered a bank scheme. These are some of the largest regulatory fines that have been imposed on domestic and international financial organizations in recent memory, ranging from flagrant fraud to actions that are neither transparent nor morally appropriate.
The bank fines are arranged in ascending order of the smallest to greatest, and we’ve included a synopsis of the offences that led a bank to be found with its hand in the proverbial cookie jar.
Are you looking for particular cases where banks were penalized for neglecting to identify money laundering activities? View our list of the highest fines for violating anti-money laundering laws.
Binance Violates the Banking Secrecy Act — $4.3 Billion
After being the subject of a months-long investigation by the US Justice Department, cryptocurrency exchange company Binance eventually entered a guilty plea to an inadequate anti-money laundering program.
Binance entered into a guilty plea, agreeing to pay U.S. regulators $4.3 billion in exchange for founder Changpeng Zhao (CZ) resigning as CEO.
Binance will additionally be subject to a third-party monitor under the direction of the Financial Crimes Enforcement Network of the U.S. Treasury as part of the settlement. To attest to Binance’s compliance with US federal laws, the monitor will review the company’s accounts and transactions.
A portion of the accusations against Binance concerned the platform’s willing facilitation of transactions from terror organizations, nations such as North Korea and Iran, and ransomware hackers.
The AML Program That Wasn’t — $1.256 Billion
Anti-money laundering program, or AML for short. To put it briefly, banks are supposed to adhere to policies and procedures that discourage financial crimes. However, the U.S. Department of Justice (DoJ) discovered in 2012 that HSBC Bank USA’s AML program was merely ceremonial.
Rather, the bank tended to ignore its international account holders and related operations. Evidence of dubious transactions for clients in sanctioned countries such as Iran, Cuba, Libya, Sudan, and Burma led to HSBC being found in breach of the Banking Secrecy Act, Trading with the Enemy Act (TWEA), and the International Emergency Economic Powers Act (IEEPA).
It was determined that HSBC was responsible for helping to launder at least $881 million in money connected to drugs.
The MAN Group’s Poor Trading Oversight — $1.312 Billion
Nor are hedge funds exempt from financial authorities’ scrutiny. One of the biggest publicly traded funds globally, The MAN Group is a legendary hedge fund that dates back to 1783. The issues started in 2007 when the brokerage section split off to become MF Global, a distinct company.
In summary, the company consistently violated trading restrictions and had inadequate debt provisions. And even struggled to keep enough liquidity on hand to cover failed calls. The company and its principal directors, including CEO John Corzine. Were the subject of ongoing investigations even after it filed for bankruptcy in 2011.
The entity conducting the investigation was the Commodity Futures Trading Commission (CFTC).
JPMorgan Chase & the Biggest Ponzi Scheme — $1.7 Billion
A list of the “worst of the worst” financial fines would be incomplete without Bernie Madoff. He is renowned for having executed the biggest Ponzi scam in recorded history, tricking his clients out of an estimated $65 billion over several decades. Madoff was convicted of fraud in 2009, while the markets were still in shock from the collapse of the housing bubble, and he received a 150-year prison sentence.
Contributing banks such as JPMorgan Chase were also held accountable due to inadequate supervision. That let Madoff defraud his clients without consequence. The international bank consented to reimburse Madoff’s victims $1.7 billion to escape prosecution.
SAC Capital Advisors & Insider Trading — $1.8 Billion
Adding to the list of hedge funds hit with some of the largest fines for insider trading is another hedge firm. When a person or organization obtains insider knowledge about a publicly traded company, it’s known as insider trading. This gives the insider an unfair advantage over other retail or commercial traders. The Securities and Exchange Commission (SEC) has been looking into SAC Capital Advisors for many years. But things became serious in 2013.
The New York company was found guilty of securities fraud, wire fraud, and insider trading in addition to insider trading. In addition to a hefty $1.8 billion punishment, many individual dealers were facing jail time. This is the biggest insider trading fine in American history as of right now.
Credit Suisse & Tax Fraud — $2.5 Billion
It’s common to want to pay less in taxes. Using dishonesty to do this is a terrific way to get fined heavily or get to experience the inside of a jail cell. Allegations of dishonest accounting to help U.S. customers file false income tax returns and supporting documentation with the IRS landed Credit Suisse in an inquiry that lasted for years.
Still, the bank’s dubious math wasn’t exclusive to the United States. Credit Suisse was also under investigation by tax authorities in Brazil and Germany, among other nations. The bank was forced to pay $1.8 billion in the United States. But when other fines are added in, the total comes to $2.5 billion. ‘Compliance Fines’
LIBOR Price-Fixing Scandal — $2.5 Billion
Although price fixing is never a good idea, monopolies are prohibited, and occasionally even banks need to be reminded of this. Criminal allegations about a foreign exchange that included multiple large multinational banks between 2007 and 2013 are the subject of the LIBOR scandal. For their roles in the plan, Citicorp, Barclays PLC, JPMorgan Chase & Co., The Royal Bank of Scotland plc, and UBS AG all entered guilty pleas to felonies.
To put it plainly, bank forex (foreign exchange) ‘Legal Penalties’ collaborated to manipulate the value of the euro relative to the US dollar to benefit financially. The traders went by the moniker “The Cartel” and even started secret chat rooms and codes to manipulate exchange rates as if this weren’t enough.
The currency rates were usually adjusted twice a day, once at 1:15 PM for the fix from the European Central Bank and once at 4:00 PM for the fix from World Markets/Reuters. The dealers would guarantee that the member banks would incur as few losses as possible by agreeing to buy and sell only during designated hours. The $2.5 billion fine is hardly the last word for the institutions that were exposed, as is the case with many other items on this list. ‘Compliance Fines’
Wells Fargo’s Phantom Accounts — $3 Billion
One of the most recent transgressors is intimately connected to the United States financial institution, Wells Fargo. In contrast to many of the other companies ‘Legal Penalties’ Wells Fargo is mentioned because it has allegedly damaged over 16 million customer accounts through persistent criminal behaviour.
A few of the financial company’s most notable transgressions include the unauthorized opening of credit and phantom accounts, as well as the provision of banking services using actual customer names. The cause of these transgressions? The bank required its staff to meet lofty sales targets. The bank accepted a $3 billion settlement with the DoJ as an act of contrition. That number might rise, though, as the Consumer Financial Protection Bureau (CFPB) is currently looking into more claims made against Wells Fargo.
Wells Fargo & Rampant Mismanagement — $3.7 Billion
As you can see, a few of these banks never seem to learn their lesson and end up being repeat offenders. Wells Fargo reappears this time due to more allegations of poor management and consumer mistreatment. A $3.7 billion settlement was reached between the bank and the CFPB. Customer payments for vehicle and home loans were allegedly misapplied, according to the allegations.
In the meantime, inaccurate interest ‘Legal Penalties’ were imposed on other customers. In extreme situations, the bank’s mistakes cost people their cars or homes. It should be noted that the settlement consists of almost $2 billion in direct payments to consumers impacted by the bank’s wrongdoings, as well as a $1.7 billion civil penalty.
Credit Suisse’s Toxic Asset Sell-Off — $5.3 Billion
Keeping your books balanced is one thing. But, it is illegal to try to prevent harm before it occurs. When you know your company operations will exacerbate a severe economic crisis. Following the Subprime Mortgage Crisis (SMC), some banks, notably Credit Suisse, found themselves in legal hot water.
In the decade that followed, institutions resolved to have a big impact on the actions of ‘Legal Penalties.’ That precipitated the Great Depression and they discovered that their actions would not go unpunished. Before the onset of the financial crisis, Credit Suisse was required to pay a settlement of $5.3 billion for peddling toxic debts. Of this amount, about $2.48 billion was paid in civil penalties, while the remaining $2.1 billion was utilized for consumer assistance.
This is only a small portion of the SMC’s consequences though. Nearly all of the country’s largest banks as well as numerous international corporations were hit with hefty fines for negligent supervision. And purposefully giving loans to unsuitable borrowers.
Goldman Sachs & the Pilfered Malaysian Coffers — $5.4 Billion
Nobody is fond of a thief. However, you should not be shocked if the long arm of the law reaches you. If you steal from public coffers. 2020 saw Goldman Sachs embroiled in controversy over its role in the 1MDB crisis in Malaysia. Millions that were taken from the public investment fund are mentioned in the incident.
While local Malaysian government officials and their allies were the scandal’s masterminds, Goldman Sachs was charged with helping to facilitate money laundering. So that funds from the state fund could be diverted. The bank consented to pay a total of $5.4 billion to several international regulators. Including the DoJ in the United States, to avert more inquiry and legal action. In addition, the bank settled a restitution claim with Malaysia for an additional $1.4 billion. ‘Compliance Fines’
Deutsche Bank & SMC — $7.2 Billion
Poor business practices that put profit ahead of moral principles will always come back to haunt you. This is something that Deutsche Bank. A big international bank with its headquarters in Germany can speak to. Having been fined $7.2 billion in 2016 for trying to sell off hazardous assets before the housing crisis. Of that amount, about $4.1 billion will be allocated over the next five years for loan modifications and consumer assistance ‘Legal Penalties.’
BNP Paribas’ Money Laundering — $8.973 Billion
Astute people and companies understand that it is not a good idea to try to get around anti-terrorism regulations. However, the French bank BNP Paribas missed that memo. In 2015, the bank was revealed to have processed billions of transactions via the U.S. financial system on behalf of sanctioned nations. In violation of both the TWEA and the IEEPA.
According to the DoJ, BNP Paribas was charged with “deliberately disregarding the law,” trying to hide its tracks while aiding terrorists in nations including Sudan, Iran, and Cuba. The bank had to pay the U.S. government $8.833 billion in addition to $140 million in fines, for a total of $8.973 billion. ‘Compliance Fines’
JPMorgan Chase & SMC — $13 Billion
There were many unclean banking hands in the subprime mortgage catastrophe. As a result, while many banks were hit with fines, some received far larger penalties. JPMorgan Chase found itself under fire for its role in providing people with mortgages that were not thoroughly reviewed. Leading to both federal and civil lawsuits. In 2013, the bank and the DoJ reached a $13 billion settlement.
This bank wasn’t the only one, though. As you may recall, JPMorgan, Washington Mutual, and investment bank Bear Stearns all had to face their reckoning. The two latter enterprises, however, are no longer in business. When both companies went ‘Legal Penalties’ in 2008, JPMorgan Chase decided to buy them, which prompted several concerns. While Bear Stearns was purchased by the investing section, Washington Mutual was merged into the Chase Bank name. ‘Legal Penalties’
Bank of America & SMC — $30.6 Billion
If there’s a biggest loser for “most fines paid” from the SMC scandal, it’s Bank of America (BoA). Yes, several banks paid a lot of money for their involvement in activities that destabilized the global economy. But, BoA has faced the most fines during this period. BoA found itself agreeing to multiple settlements over the past decade to atone for its questionable practices. ‘Compliance Fines ‘
As part of the $25 billion deal with the five biggest mortgage ‘Legal Penalties’ in the United States, the bank paid $11 billion. The purpose of this was to rectify past injustices related to foreclosure and loan servicing. However, in 2013, the bank settled with Fannie Mae for $10.3 billion. Once more, BoA settled with the Federal Housing Finance Agency in 2014 for $9.3 billion.
Compliance Software to Keep You Protected
This “best of the worst” list brings to light an important truth: breaking the law can have serious consequences. And big departments to oversee these requirements. Numerous providers who can help businesses of all sizes are highlighted in our list of the top compliance software providers. Look it over below. ‘Legal Penalties’
