In late April, U.S. federal prosecutors announced that they would be filing official criminal charges against a few of the world’s largest banks. Attorneys who were briefed on the development stated that these circumstances could result in the very first guilty plea from a major financial institution in more than 20 years.
As the U.S. is bringing criminal charges to Credit Suisse and BNP Paribas in federal court, officials are countering the widely-held belief that Wall Street banks are so essential to the economy that they cannot be held criminally responsible. The fact that few criminal cases have been brought against banks and their leaders has been troubling to many, a perception that these institutions are too big to criminally punish.
Federal Officials & Bank Regulators Take Action
Federal officials in Washington D.C. and New York are announcing these charges to address this public outcry and meeting with bank regulators to discuss how to punish the institutions without leading to their failure and impacting the economy.
The U.S. bringing criminal charges to Credit Suisse and BNP Paribas reflects a new strategy, which is to see guilty pleas in two of the most egregious cases.
- The investigation into Credit Suisse revealed that the bank was giving illegal tax shelters to Americans; and,
- The charges against BNP Paribas, France’s largest financial institution, are related to doing business with nations that the U.S. has blacklisted. The Sudan and Iran are among them;
- The strategy will affect American banks as well, though investigations are ongoing and no charges are yet pending.
During discussions with BNP, which maintains a large investment bank in Manhattan, prosecutors outlined their plan to request a criminal guilty plea from the bank’s parent organization. If BNP is unable to negotiate for a lesser plea, according to the organization’s legal team, leadership will turn to high-ranking French officials to pressure federal prosecutors. This case could respond to congressional criticism that arose when British investment firm HSBC escaped similar criminal charges in 2012.
The process of filing charges could still be complicated, as the patchwork of regulatory agencies between the U.S. and European banks is interrelated but complex. Regulators are aligned with prosecutors in theory, but some may feel bound by agency rules that govern criminal procedure. In the past, a top federal regulator gave his blessing to procuring a guilty plea from JPMorgan Chase over the Bernard Madoff affair; however, that same individual later stated that federal law might affect the bank’s charter if a conviction resulted. It’s necessary for prosecutors and regulators to work in concert rather than aim for their own goals.
Government officials may fear the repercussions that resulted in Arthur Andersen’s handling of the Enron case. The accounting firm went out of business after the 2002 criminal conviction, leading prosecutors to adopt a more cautious strategy when penalizing large corporations.
As the U.S. is bringing criminal charges to Credit Suisse and BNP Paribas, representatives from both banks refused to comment publicly. BNP has privately stated that the consequences of a guilty plea could be severe.
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