Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

Maybe some criminal prosecutions this time around from HSBC and forex investigations

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Maybe, just maybe, there may be some criminal charges individually and corporately.

2/9 – New York Times – Justice Department Is Seeking Felony Pleas by Big Banks in Foreign Currency Inquiry

DoJ has told Barclays, JPMorgan, RBS, and Citigroup they will have to cop a guilty plea to settle the forex manipulation cases. Article suggests the criminal pleas won’t have any serious consequences.

Article says this case may also involve indictment of individual traders.

It is possible, just possible, we may see some progress toward a little more serious consequences.

New issue surfaced by the NY DFS suggests several banks created their own trading platform for forex which had the side benefit of allowing the banks to cancel transactions and run them again later in the day to make more money at the expense of customers. DoJ has also opened an investigation on that issue.

Article points out a pattern emerging of an investigation of one specific issue is identifying separate issues which generates a new, separate investigation.

That’s the part that ought to really be worrying senior leadership, regulators, and auditors. Where does the bad behavior end? Where is there a fence around the issues?

2/10 – The Guardian – US prosecutors weigh criminal charges against HSBC as Warren turns up the heat – Not much new info. All the same, it is worth knowing the DoJ has had an ongoing investigation of HSBC and other banks in Switzerland over tax evasion. No comments from DoJ representatives on likelihood or timing of any possible criminal charges. From this and other articles, it looks like there will be increased pressure to do something serious this time.

Reminder in the article about the $1.9B settlement for HSBC’s aiding money laundering on the southern border of the U.S.

2/10 – WSJ – U.S. Seeks Guilty Pleas From 4 Banks in Currency Antitrust Probe– DoJ attorneys are working on separate investigations are considering criminal antitrust violation charges against the banks and criminal fraud charges against individuals. Also considering criminal fraud charges against one or more banks.

Article says perceptions are changing fast. With Credit Suisse surviving a criminal guilty plea for a century of intentional money laundering (um, yeah, you can tell where I’m coming from), there is a realization that taking a plea deal is survivable. Capital punishment would only happen with charter revocation.

One perception:

Some executives also said they don’t believe the U.S. would revoke their banking licenses or charters given the widespread economic damage that could accompany such a move.

Perhaps that could lead to a “too big for capital punishment” category, although it doesn’t fit the current stylistic format of TBTF/TBTJ/TBTM/TBTP/TBTR (too big to fail/jail/manage/punish/regulate). TBFCP just doesn’t work. Oh, wait. Maybe TBTK would work.

Sorry. I’ll get serious again.

Article also has some deep inside-baseball stuff:

  • DoJ reportedly has not asked the Office of Comptroller of the Currency for assurances they won’t revoke charters as consequence of guilty pleas.
  • Resolution of just the immediate issue will take months.
  • A new investigation of fraud in the setup of proprietary trading systems will complicate negotiations. Since those are a separate issue, the banks will be worried that the trading platform issue will lead to another, separate round of settlements. The banks may want to roll settlement of that issue into the forex issue to minimize unexpected intertwined damage.

2/9 – Sam Antar’s tweet :

Memo to HSBC:  Don’t worry. Bank executives don’t go to jail in America and your investors will foot the bill for the fines. #HSBC

I wish I could say he is wrong, but I can’t.

Look forward to the day that is no longer true. Or, in the alternative, the day when TBTX banks stop committing felonies. Either one works for me.

Written by Jim Ulvog

February 13, 2015, 8:44 am at 8:44 am

Posted in Other stuff

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