Justice eyes criminal cases against banks

The number two official at the U.S. Justice Department vowed Monday that the agency would pursue criminal cases against banks that repeatedly skirt financial regulations.

Deputy Attorney General James Cole said the Justice Department is resolved to take action against banks that do not create a culture of regulatory compliance to which their employees are held.

“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,” Cole said during remarks at a conference hosted by the American Bankers Association and American Bar Association.

Cole said banks often value employees who are willing to come as close as possible to violating regulations — or even step across the legal line — to capture a competitive edge.

“Too many seem to be willing to take advantage of any edge — including those of dubious legality — to make money,” Cole said. “And we are troubled that many employees believe that their supervisors, including in some cases corporate management, actually want them to behave this way.”

U.S. Financial regulators have come under criticism for choosing to pursue settlements with bad actors on Wall Street, rather than press criminal cases.

But Cole said the fallout from a recent spate of DOJ probes should give would-be financial sector violators pause.

In particular, Cole cited cases in which financial institutions were found to have attempted to manipulate interest rates tied to various currencies. Those cases have yielded more than $3.7 billion in penalties paid to law enforcement and regulatory agencies, and criminal charges against five individuals.

Cole said the investigators are on the lookout for patterns of misconduct across multiple units or locations of a bank, institutions that do not maintain sufficient compliance programs and repeat offenders.

“And when we see crimes condoned by management, banks, like all corporations, will face significant consequences,” Cole said.