Banks and Deferred Prosecution


After searching through a fair amount of blogs using key words including “ethics” and “banking,” I stumbled upon one called Nonprofit Update, and this blog in particular in which the author details the Barclays Libor manipulation case and it’s penalties. He documented this previously in his other blog, Attestation Update – A&A for CPAs.

The first blog post I mentioned highlights deferred prosecution agreements. Deferred prosecution agreements help settle cases between the government and big banks like Barclays. Whoever is being prosecuted, in this case Barclays, signs an agreement promising not to do whatever they did wrong again. As long as they don’t break this promise, the government doesn’t prosecute. This is done to avoid risks, bad publicity, and costs.

The further issue that the author addresses is the fact that Barclays was already under probation for money laundering. Barclays’ response was that the Libor manipulations took place between 2005 and 2009, and thus is “outside the probationary timeframe of the existing deferred prosecution agreement.” The author brings up the fact that it might not seem right for a huge bank to break the law in two different ways, and then only be given a firm warning because the actions took place during a certain timeframe. The author questions at the end whether there is a limit to the amount of deferred prosecution agreements an organization can have at one time.

I found this post to be illuminating, as it shows the potential loopholes in the political system that big banks are able to take advantage of. Are they given too much power? Do penalties need to be more severe? The industry seems to be in trouble as it becomes less trusted, and it is no surprise for big banks like Barclays to look for and take unethical shortcuts. Shouldn’t banks know what is right and wrong and how to behave? Despite what laws are broken or what they are labeled as, they are broken laws. It may have been the first time Barclays broke the law by manipulating Libor, but it wasn’t the first time they broke the law in general. Perhaps for this there should be greater consequences.

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