On a flight to Stockholm this week, the man next to me asked what I do, and I explained. “Well, it’s certainly your moment!” he said. And with Standard Chartered and HSBC in the headlines at the moment, I had to agree. I don’t take particular pleasure from their failings – although I do read all reports avidly for training titbits, and note down ideas for future MLRO workshops. (I may be wrong, but I think that all regulators – no matter their sector or their jurisdiction – keep a close eye on each other, and once one has issued a finding that stresses a particular area of concern, all the others then add that to their list of things to check.)
And I don’t think that larger and larger fines – or penalties, or settlements, or whatever you want to call them – is having much effect. For a start, financial penalties hurt the shareholders more than anyone, which doesn’t seem quite right. What I fear we need to see is the return of the perp walk: responsible executives being led from swanky head offices, maybe even in handcuffs. It had a miraculous effect when Enron and Andersen individuals were held responsible for their frauds. And I don’t buy all of this “it’s old news, we’re the new guard” stuff. Why not go after the old guard, then? They’re still alive, if not still in post – and, as a documentary showing tonight on ITV will explain, they will have plenty of company inside, with pensioners now making up the fastest-growing age group in British jails. So I think we should have fewer fines and more prosecutions: after all, if due diligence means going behind structures to find the responsible individuals, surely that is the standard that should be applied to – as well as by – financial institutions.
Quick update: An interesting letter appeared in the Economist on 5 January 2013 – scroll down to the one entitled “Prosecute the bankers.”