UK lags US in penalty enforcement for serious economic crime

The UK is lagging behind the US in holding large companies to account for serious economic crimes such as financial fraud or money laundering, according to research by Corruption Watch, which is calling for more effective legislation

The campaigning group analysed the enforcement of major financial crime and money laundering cases in New York and London over the past decade. The results show the US has imposed penalties ten times those imposed by the UK on New York and London based banks for financial wrongdoing such as exchange rigging in the Libor and foreign exchange (Forex) cases, and for money laundering.

The US has managed to bring in £22bn more in penalties for financial crime committed by banks and financial institutions than the UK has, and nearly half (£10bn) of that was from UK financial institutions.

The research found the UK has not brought a single toxic mortgages, or money laundering and sanctions violations compared to close to 20 criminal enforcement actions by the US.

The US brought in five and a half times the amount that the UK did in the Libor scandal, despite Libor being a London based inter-bank lending rate.

In addition, the US brought in four and half times the amount that the UK did in relation to Forex rigging, despite London accounting for 40% of the foreign exchange market compared to New York’s 20%.

Corruption Watch also calculated the US brought in 34 times the amount the UK has in relation to money laundering and sanctions violations.

The UK has not brought a single successful corporate criminal prosecution against a UK bank for money laundering or sanctions violations. The US, on the other hand, has brought criminal enforcement actions against six of the big banks and imposed almost £3bn in criminal fines.

UK regulators have gone after 12 banks and have imposed just over £260m in non-criminal fines. However, US regulators went after 31 banks and managed to impose nearly £6bn in non-criminal fines – over 22 times that of the UK.

The US has extracted almost £1.7bn in fines from UK-headquartered institutions, while the UK has only extracted £81m in fines from UK-headquartered institutions.

The report stated: ‘The UK is effectively outsourcing its criminal enforcement for financial institutions to the US, and as a result is failing to effectively police the integrity of its own markets.

‘The US Treasury is the main beneficiary of this – receiving billions in fines from UK financial institutions which, if the UK ensured it had the right legal and regulatory framework, proactively enforced, could be going to the UK Treasury.’

Susan Hawley, policy director at Corruption Watch said: ‘Big businesses and banks are effectively above the law when it comes to fraud and money laundering in the UK. Until the government implements corporate liability reform, the UK’s prosecutors will remain toothless in the face of major corporate financial crime.’

Corruption Watch wants the UK government to fulfil its commitment to introduce new legislation that would make companies criminally liable where they fail to prevent economic crime such as fraud and money laundering, and to ensure that the Law Commission does a full review of the corporate liability laws in the UK.

Corporate Crime Gap - How the UK Lags the US in Policing Corporate Financial Crime is here.

Report by Pat Sweet

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