Sometimes the violations are fairly technical in nature and sometimes they are brazen frauds. Regardless, the fines and penalties can run into the billions of dollars. These examples remind us that compliance failures can be massively expensive, and its worth investing in the lines of defense that can help keep them from occuring, such as the compliance department, risk management, legal, and, of course, internal audit.
In just the last ten years alone, the number of fines has reached some staggering levels. From time to time, some banks get a little too zealous about padding their accounting sheets. When this happens, it can fall under the category of a bank scheme. From outright fraud to behaviors that are far from transparent or ethical, these are some of the biggest compliance fines in recent history that have been levied against financial institutions domestic and foreign. Let’s dive into the biggest compliance violations and penalties in the past decade.
14) HSBC — The AML Program that Wasn’t — $1.256 Billion
AML is short for anti-money laundering program. In short, banks are expected to uphold business practices and regulations that don’t support financial crimes. However, in 2012, the U.S. Department of Justice (DoJ) found that HSBC Bank USA had an AML program that wasn’t much more than for show.
Instead, the bank tended to look the other way regarding its foreign account holders and associated activities. HSBC was found in violation of the Banking Secrecy Act, Trading with the Enemy Act (TWEA), and the International Emergency Economic Powers Act (IEEPA) after evidence was uncovered of questionable transactions for clients in sanctioned nations like Iran, Cuba, Libya, Sudan, and Burma.
HSBC was found liable for aiding in the laundering of at least $881 million in drug-related finances over several years, leading to the $1.256 billion fine.
13) The MAN Group — Poor Trading Oversight — $1.312 Billion
Hedge funds aren’t immune to oversight from financial regulators either. The MAN Group is a storied hedge fund with a history that began in 1783 and is one of the largest publicly traded funds in the world. The brokerage division emerged as a separate entity known as MF Global in 2007, and that’s when the problems began.
To summarize, the firm was constantly found in violation of trading regulations, poor debt provisions, and even difficulty with maintaining liquidity to cover bad calls. While the company went bankrupt in 2011, the investigations continued into the company and its core directors — including the CEO John Corzine.
The Commodity Futures Trading Commission (CFTC) was the investigating party. While the company was ordered to pay $1.212 billion to customers from the Federal Court in New York, and a $100 million penalty with the CFTC, individual directors also paid heavy fines. Corzine himself settled with the CFTC for $5 million and agreed to a lifetime ban from CFTC markets.
12) JPMorgan Chase — The Worst Banking Client Ever — $1.7 Billion
You can’t have a “best of the worst” financial fines list without including Bernie Madoff. He’s known for having pulled off the largest Ponzi scheme in history — defrauding his customers while grossing an estimated $65 billion over several decades. In 2009, when the markets were still reeling from the bursting housing bubble, Madoff was found guilty of fraud and sentenced to 150 years in prison.
Meanwhile, contributing banking institutions like JPMorgan Chase were also found liable because of poor oversight that allowed Madoff to swindle his victims with impunity. To avoid prosecution, the multinational bank agreed to pay $1.7 billion in restitution to Madoff’s victims.
11) SAC Capital Advisors — An Inside Job — $1.8 Billion
Yet another hedge fund makes the list with one of the more considerable fines levied for insider trading. Insider trading is when an individual or institution gets advanced non-public information about a publicly traded stock, thereby giving them an unfair advantage over other consumer or commercial traders. SAC Capital Advisors had been under investigation by the Securities and Exchange Commission (SEC) for years but things came to a head in 2013.
The New York firm was found guilty of not just insider trading, but wire fraud and securities fraud. Along with a hefty $1.8 billion fine, several individual traders found themselves headed to jail. To date, this is the largest fine for insider trading in U.S. history. Of that amount, half was set aside for criminal fines and the other half for civil fines related to money laundering and forfeiture actions. Another result was the company and its subsidiaries being barred from ever taking any future outside investor funds.
10) Credit Suisse — Facilitating the Tax Dodge — $2.5 Billion
The desire to reduce your tax liability is normal. Engaging in deceit to do so is a great way to either see the inside of a jail cell or pay hefty fines. Credit Suisse was under investigation for years because of allegations regarding unscrupulous accounting to aid U.S. customers in falsifying income tax returns and accompanying documents that were submitted to the IRS.
However, the bank’s questionable arithmetic wasn’t just limited to the U.S. customers. Taxation agencies in other countries including Brazil and Germany also had their eyes on Credit Suisse. In the U.S., the bank was ordered to pay $1.8 billion. However, along with additional fines, the total amounts to $2.5 billion.
9) ‘The Cartel’ — The LIBOR Price-Fixing Scandal — $2.5 Billion
Price fixing is never a good idea, but sometimes even banks need to be reminded that monopolies are illegal. The LIBOR scandal involves criminal charges regarding a foreign currency exchange that involves several major multinational banks between 2007 and 2013. Citicorp, Barclays PLC, JPMorgan Chase & Co, The Royal Bank of Scotland plc, and UBS AG all pled guilty to felony charges for each member’s involvement in the scheme.
Simply put, forex (foreign exchange) traders at the banks worked in tandem to manipulate currency values between the U.S. dollar and the European euro for financial gain. As if this isn’t enough, the traders called themselves “The Cartel” and even initiated private chat rooms and codes to influence exchange rates.
Typically, the exchange rates were edited twice daily, at 1:15 PM for the European Central Bank fix, and at 4:00 PM for the World Markets/Reuters fix. The traders would agree to only buy and sell at specific times, ensuring minimal losses for participating member banks. As with many other entries on this list, that $2.5 billion fine isn’t the final word for the exposed institutions.
8) Wells Fargo — The Phony Accounts Scandal — $3 Billion
One of the most recent offenders hits close to home with the American banking giant, Wells Fargo. Unlike many of the other entries on this list, Wells Fargo gets a mention because the firm repeatedly engaged in illegal activity that’s alleged to have harmed over 16 million consumer accounts.
Highlights from the financial company’s misdeeds include opening up phantom banking and credit accounts and banking services under real customer names without consent. The reason for such misdeeds? The bank demanded high sales quotas from its employees. As a mea culpa, the bank agreed to a $3 billion settlement to the DoJ. However, the Consumer Financial Protection Bureau (CFPB) is still investigating other allegations against Wells Fargo so that figure could still increase.
7) Wells Fargo (Again) — Rampant Mismanagement — $3.7 Billion
As you can see, several banks on this list don’t ever seem to learn a lesson, becoming repeat offenders. This time, Wells Fargo returns over additional claims of mismanagement and consumer abuses. The CFPB settled with the bank for $3.7 billion dollars. Allegations included that customer payments were misapplied for mortgages and auto loans.
Meanwhile, other consumers were hit with incorrect interest charges. In severe cases, people lost their homes or cars as a result of the banks errors. Note that this settlement includes a $1.7 billion civil penalty and over $2 billion that will be given directly to customers affected by the bank’s misdeeds.
6) Credit Suisse (Again) — Front-Running the Financial Crisis — $5.3 Billion
Balancing your books is one thing. But knowing that your business practices are going to contribute to a massive economic crisis — and using underhanded tactics to stave off the damage before it happens by selling assets you know are worth far less — is criminal. Several banks found themselves on the wrong side of the law after the subprime mortgage crisis, including Credit Suisse.
Institutions determined to significantly influence activities that ushered in the Financial Crisis—what some call the “Great Recession”—later learned in the following decade that those behaviors wouldn’t go unpunished. Credit Suisse was ordered to settle in the amount of $5.3 billion for selling toxic debts before the financial crisis took hold. Roughly $2.48 billion of this figure was paid as a civil penalty with $2.1 billion used for consumer relief.
However, this is just one part of the fallout from the subprime mortgage crisis as almost every major bank across the U.S. and many multinationals also faced steep fines for poor oversight and intentionally providing loans to unsuitable customers.
5) Goldman Sachs —Banking the Malaysian Thieves — $5.4 Billion
No one likes a thief. But if you steal from government funds, don’t be surprised when the long arm of the law finds you. Goldman Sachs found itself in hot water in 2020 for participating in the Malaysian 1MDB scandal. The event refers to millions that were stolen from the state investment fund.
While the masterminds behind the scandal were local Malaysian government officials and accomplices, Goldman Sachs was accused of facilitating money laundering to divert money from the state fund. To avoid further investigation and legal action, the bank agreed to pay a total of $5.4 billion to multiple global regulators including the DoJ in the United States. Additionally, the bank paid another $1.4 billion to Malaysia as part of a restitution settlement.
4) Deutsche Bank — Front-Running the Financial Crisis, Part II — $7.2 Billion
Shoddy business practices that prioritize profit over sound actions will always catch up with you in the end. Deutsche Bank, a massive multinational bank headquartered in Germany, can attest to this as the financial institution was slapped with a $7.2 billion fine in 2016 for attempting to offload toxic assets ahead of the housing crash. Of that figure, roughly $4.1 billion is being set aside for consumer relief and loan modifications that will be spread out over the next five years.
3) BNP Paribas — Banking the Bad Guys — $8.973 Billion
Smart individuals and businesses know that trying to scheme around anti-terrorism laws is a bad idea. However, BNP Paribas, a French-based bank, apparently failed to get the memo. The bank was found in violation of both the IEEPA and TWEA in 2015 for processing billions of transactions through the U.S. financial system on behalf of sanctioned nations.
BNP Paribas was accused of “deliberately disregarding the law” according to the DoJ, working to cover its tracks in the process, while helping to support terrorism in countries such as Sudan, Iran, and Cuba. The bank was required to fork over $8.833 billion to the U.S. government as well as pay $140 million in fines, which gets you the $8.973 billion total.
2) JPMorgan Chase (Again) — Contributing to a Global Financial Meltdown — $13 Billion
The subprime mortgage crisis had a lot of dirty banking hands in the cookie jar. So, while many banks faced big fines, some were slapped with significantly higher ones. JPMorgan Chase found itself in the hot seat both for federal and civil claims because it participated in passing out poorly vetted mortgages to consumers. The bank agreed to settle for $13 billion in 2013 with the DoJ.
However, this bank wasn’t alone. You may remember that JPMorgan faced its day of reckoning along with the investment bank Bear Stearns and Washington Mutual. However, the two latter firms no longer exist. Both went defunct in 2008, with JPMorgan Chase opting to purchase them — which raised several red flags. Washington Mutual was absorbed into the Chase Bank brand while Bear Stearns was acquired under the investments division.
1) Bank of America — Contributing to a Global Financial Meltdown, Part II — $30.6 Billion
If there’s a biggest loser for “most fines paid” from the SMC scandal, it’s Bank of America. Yes, several banks paid a lot of money for their involvement in activities that destabilized the global economy. But, BofA has faced the most fines during this period. The big bank found itself agreeing to multiple settlements over the past decade to atone for its questionable practices.
The bank paid $11 billion as part of the $25 billion agreement with the five largest mortgage servicers in the United States. This was meant to address previous foreclosure and loan servicing abuses. But then, the bank paid $10.3 billion to Fannie Mae as part of a settlement in 2013. Again, in 2014, BofA paid $9.3 billion in a settlement with the Federal Housing Finance Agency.
Compliance is Crucial
This “best of the worst” list of compliance failures highlights a critical reality: non-compliance can cost you bigtime. Likewise, just because you get away with questionable behavior initially, doesn’t mean that regulators or government agencies won’t eventually come knocking on your door. In most of the cases we highlighted above, financial institutions were engaged in clearly criminal or at least unethical activities that they knew were problematic.
A program of solid internal controls and good oversight by compliance, risk management, and internal audit can go a long way to avoiding such massive fines and penalties. 
Osman Husain is the content lead at Enzuzo. He has a background in data privacy management via a two-year role at ExpressVPN and extensive freelance work with cybersecurity and blockchain companies. Osman also holds an MBA from the Toronto Metropolitan University.