Saturday, June 25, 2022

Can a large fine ever be a sufficient penalty for financial misconduct?

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IIn 2012, bank HSBC was fined $1.9 billion (£1.5 billion) by the US Department of Justice for aiding money laundering by Mexico’s Sinaloa drug cartel. Rather than face criminal prosecution, the bank entered into a Deferred Prosecution Agreement (DPA), under which a court-appointed observer reviewed whether HSBC reformed its ways over the next five years.

The DPA is growing in popularity and is used by authorities in many countries to penalize large companies. Rather than press charges against the company or individuals, they agree to pay a fine and work to prevent a recurrence. In the UK, the Serious Fraud Office has made 12 such agreements in recent years.

But is it justice? The DPA is not a tool available to you or me. It is only used in cases involving corporate criminals. The company may end up paying a fine and participating in some kind of aid program, but its employees avoid court and jail — their reputations remain intact.

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