Banks in the U.S., Australia and Israel Rack-Up the Most Fines from Regulators

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Banks in the United States, Australia, and Israel were the largest fined banks in any nation from their local regulatory authorities, according to a new study issued by the Finbold Bank Fines Report 2020.

The report found that banks in these nations accounted for 97.32% of all $13.62 billion (or €11.61 billion) in bank fines issued in 2020.

At the individual country level, the data found that the banks in these five nations were the most fined banks in the world:

  1. United States banks top the list as the most fined banks in the world. They were hit with $10.74 billion (€9.15 billion) in fines;
  2. Australian banks were fined $903.7 million (€ 770 million);
  3. Israeli banks were fined $895 million (€762.97 million);
  4. Swedish banks were fined $535.1 million (€ 456.18 million);
  5. German banks accounted for $198.2 million (€169.01 million) in penalties.

U.S. banks topped the list of banks hit with the most fines. Goldman Sachs is the most fined bank this year at $6.17 billion (€5.26 billion). Wells Fargo carries the second-highest fines at $2.96 billion (€ 2.53 billion). Australia’s Westpac bank has the third-highest penalties at  $903.1 million (€770 million), followed by Israel’s Bank Hapoalim at $894.6 million (€762.97 million).

Other banks that were fined the most were Sweden’s Swedbank at $422.1 million (€360 million) and Germany’s Deutsche at $148.1 million (€126.52 million). Deutsche Bank is a long-time major lender to Donald Trump and has also forgiven millions in loans, according to the New York Times.

The research found that anti-money laundering and Know Your Customer policies are among the biggest violations. (Watch this video to see how money laundering works.)

Goldman Sachs holds a record fine based on the report, which emanated from the facility’s role in raising millions of sovereign wealth funds in Malaysia. The scandal has tainted Goldman’s image over the last decade. Following the scandal, industry players are expecting regulatory bodies to amend their penalties,” according to Finbold.

It’s important to remember that these bank crimes are being done in an environment of regulated capitalism. Imagine what would happen if capitalism was unregulated.

The report noted that man of the large banks that were fined “do not have an appropriate mechanism and compliance infrastructures,” which “limits the bank’s ability to identify and address high-risk areas,” such as money laundering, bid-rigging, and not identifying criminal customers.

Criminal banks and their conspiracies are a global problem. In May 2015, five institutions, including JPMorgan Chase and Citigroup were fined roughly $5.7 billion combined, and four pleaded guilty to U.S. criminal charges over the currency market misconduct. A fifth bank UBS, plead guilty to rigging benchmark interest rates, the U.S. Justice Department said. All this was part of the breathtaking scandal to fix the LIBOR international benchmark index. The crime worked.

An amazing sidelight to this unprecedented bid-rigging crime was that Larry Kudlow, then a CNBC commentator and now a top economic advisor to Trump, famously said that the LIBOR bid-rigging crime did not affect individuals. This is a flat lie. LIBOR is used to benchmark loan interest rates worldwide, on everything from cars to homes. Kudlow was a professional liar when he was the top economist at Bear Stearns and he has continued that same job in the Trump White House.

What This Means to Bank Customers

The report on the large fined assessed against banks is only half the story. Many banks pay their fines as part of settlements with banking authorities to avoid more complex regulatory and legal problems.  Due to the size of these global banks, this is a worldwide problem which makes it easier to launder money and give loans to disreputable borrowers. For instance, Goldman Sachs’ Asian subsidiary in Maylasia recently paid a $2 billion fine in a money-laundering scheme.

From January 2018 through April 2019, banks were fined a staggering $10 billion, according to data from Fenergo. “Last year, the European Union regulators slapped a $1.2 billion fine on five banks running two cartels to collude on foreign-exchange trading. The five banks were Citigroup, JPMorgan Chase, Royal Bank of Scotland, Barclays, and Mitsubishi UFJ Financial Group,” the site says.

Since the 2008 financial crisis and resulting recession, Americans have understandably lost faith in traditional banks. A report published by Keefe, Bruyette and Woods in 2018 showed that Bank of America alone had paid a staggering $76.1 billion in fines since the 2008 financial crisis. JPMorgan Chase trailed with fines of $43.7 billion.

The U.S. banks that have paid the largest fines are:

  • Bank of America paid $16.65 billion in fines related to the sub-prime lending to unsuspecting borrowers. BOA paid the fines when it acquired Countrywide Financial and Merril Lynch who did most of the deceptions.
  • JPMorgan Chase paid $13 billion in fines for issuing bad mortgages, some of which originated from Washington Mutual and Bear Sterns.
  •  Bank of America paid $11.8 billion in fines that were part of the National Mortgage Settlement in 2012 that stemmed from the 2008 mortgage fraud crime. Bank of America paid $11.8 billion over subprime mortgages sold to Fannie Mae.

Join a Credit Union and Dump the Criminal Banks

Many of these banks have an extensive individual customer and business loan operations, so if you are an existing client of these banks you should think twice about ending your relationship.

There are many local and national credit unions that have near-pristine records when dealing with state and national banking authorities that can readily handle the needs of most types of clients. Local credit unions, co-op, or mutual-owned banks are owned by their depositors, so there are better rates, increased transparency, and a vested interest in keeping costs low.

Credit unions and co-op banks would cease to exist if they had to pay large regulatory fines, plus their bank management would be held accountable by the depositor-owners.

It’s important to note that the top management of the global banks paying the largest fines are rarely fired or demoted when these banking violations happen.

For repeat offenders, like Wells Fargo, JP Morgan, Bank of America, Chase, the bank fines are considered a cost of doing business. The fines could not be paid if they put the bank in the red and made them unprofitable, so paying the fines must be offset by the profitability of incurring the fines in the first place.

So if you are a customer of any of the banks listed here, take your business to a more ethical credit union or co-op bank.

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Chuck Epstein has managed marketing communications and public relations departments for major global financial institutions and participated in the launch of industry-changing financial products. He also has written by-lined articles for over 50 publications, five books and served as editor and publisher of nation’s first newsletter on the topic of using the PC for personal investing and trading. (“Investing Online, 1994-1999). He also is a marketing consultant, writer and speaker on topics related to investor protection and opportunities in the very dynamic cannabis industry. He has held senior-level marketing, PR and communications positions at the New York Futures Exchange, Chicago Mercantile Exchange, Lind-Waldock, Zacks Investment Research, Russell Investments and Principal Financial. He has won national awards from the Mutual Fund Education Alliance (MFEA) and his web site, www.mutualfundreform.com, was named best small blog in 2009 by the Society of American Business Editors and Writers (SABEW).

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