The Rise of Bank Prosecutions

Last year, bank prosecutions dominated federal corporate prosecutions in a way never before seen in the United States. In a recent paper, I describe how, before 2008, prosecutions of banks had been quite rare in the federal courts. The criminal liability of banks and bankers was not a topic that received much public or scholarly attention. In the wake of the last financial crisis, however, critics began to ask whether prosecutors adequately held banks and bankers accountable for their crimes. The Department of Justice (DOJ) has, in a way, responded.

In this paper, I describe the remarkable rise in the number of bank prosecutions in recent years, as well as the still steeper rise in the aggregate size of the criminal penalties imposed on banks. In 2015, almost $7 billion of the total $9 billion in corporate penalties paid to federal prosecutors came from banks. Over $22 billion in penalties were paid to federal prosecutors by financial institutions from 2001-2015. Over $15 billion of that was paid just in the five years from 2011-2015. An Appendix that accompanies my paper details these data and displays each of these cases. Underlying documents from each case can also be viewed in an online repository of corporate plea agreements and deferred and non-prosecution agreements, which will be updated this Fall. Few financial institutions were prosecuted from 2001-2004 and fewer than ten cases were brought in each year prior to 2010. The first billion-dollar criminal penalty was imposed on a bank (UBS) in 2009, and many more billion dollar cases have followed. In 2015, the chart-topping BNP Paribas case involved almost $5 billion in combined civil and criminal penalties. Still more in the way of penalties has been imposed in civil matters; the focus here is on criminal enforcement. In addition, in 2015, a remarkable number of banks -eighty of them- finalized criminal settlements with prosecutors. This was largely due to an effort by the DOJ Tax Division, namely, the Swiss Bank Program, and that program is now winding down.

Thus, 2015 was the year that bank prosecutions finally came into their own, both in the record-breaking size of the fines and in the numbers of cases resolved. The question remains whether we will see a year the likes of 2015 again, and if so, whether such enforcement will have a lasting impact. While the DOJ can claim marked achievements in recent years, I nevertheless caution against treating these data as fully answering critics’ concerns. Despite the apparent rise of bank prosecutions, central ‘too big to jail’ concerns remain: prosecution deals are inadequate both as punishments and as rehabilitative efforts designed to promote compliance. The fines are not always what they seem; many are imposed at levels far below what prosecutors could have obtained under the relevant sentencing provisions. A number of banks have settled a string of agreements with prosecutors, raising the question whether these agreements adequately deter or prevent recidivism.  

Ultimately, I conclude that, upon closer examination, the recent bank prosecutions, while noteworthy, fail to address persistent concerns that deterrent fines are not routinely imposed, that compliance terms designed to rehabilitate firms are not used effectively, and that individuals remain largely un–prosecuted. Much may depend on the approach taken by the next Administration. In the future, hopefully the rise of bank prosecutions will result not just in record monetary penalties, but also in enforcement that effectively prevent the recurrence of serious financial crimes.

Brandon L. Garrett is the Justice Thurgood Marshall Distinguished Professor of Law at the University of Virginia, School of Law.