Fines and Financial Misdemeanors

Over the past year, regulators in the United States, United Kingdom, and the European Union have hit banks with more than $9 billion in fines for having rigged the London Interbank Offered Rate, better known as Libor. But the Libor case is only one in what seems to be a spate of financial misdemeanors.

Multibillion-dollar fines for alleged respectively committed financial crimes have become a new material financial risk for financial firms. The average fine has increased seventy-fold in the past six years, rocketing from $22 million in 2008 to nearly $1.6 billion in 2014.

To this end, banks are moving beyond traditional risk management and into the kind of techniques more commonly associated with spy agencies such as the CIA and MI5. They are using advanced analysis of transaction patterns, communications, and social networks to identify potentially criminal or unethical behavior. Banks are also increasing their financial crime risk-fighting resources. However, if the banks hope to be profitable, they had better learn to also be good.