Why aren’t more bankers in jail?

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Recent headlines have not been kind to the banking industry. Some of the notable highlights include money laundering, manipulating interest rates, working with countries tied to terrorist operations and attempting to defraud the Internal Revenue Service.

These are very serious offenses. However, Public Citizen, a Washington, D.C.-based nonprofit citizen advocacy group, points out that they all share another important similarity: The U.S. Department of Justice has failed to pursue criminal charges against any of the alleged institutions.

Rather than attempt to compile evidence to convict banking executives of crimes and send them to jail, the DOJ aims for deferred prosecution agreements and non-prosecution agreements.

These agreements allow defendants to avoid serving jail time in exchange for fulfilling a list of requirements. For banks, those requirements tend to include some big fines. In fact, BNP Paribas, one of the biggest banks in the world, recently agreed to pay an almost $9 billion fine for moving money for clients in Sudan, Cuba and Iran through the U.S. financial system.

Just how often does the DOJ use DPAs and NPAs? From 2000 and 2004, data from global law firm Gibson, Dunn and Crutcher, LLP, show that it entered into an average of around four each year. Since then, the number has soared to an average of 28 agreements each year. If that many financial institutions are committing crimes, Public Citizen is asking a question that many other organizations have pondered over the past few years: Why isn’t anyone behind bars?

According to Lisa Gilbert, director of Public Citizen’s Congress Watch division, the answer seems simple. These banks are too big.

“Not prosecuting big banks that have engaged in criminal activity has given rise to the perception these financial institutions are ‘too big to jail,'” Gilbert said in a statement. “These softball prosecutions further highlight the real need to increase transparency on DOJ processes and decision-making when it comes to large financial institutions.”

What do other experts think about the current size of banks? Find out in “Should The Big Banks Be Downsized?”

Written by
David McMillin
Contributing writer
David McMillin writes about credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.