Fines & Penalties Monitor: July 2016

August 10, 2016 at 4:00 PM



While the total fines, penalties, and settlements remained flat for our large bank group – the 18 largest institutions headquartered in the U.S. and E.U. – July was anything but a quiet month. Several lawsuits were filed and the results of a high profile investigation were announced this month.

The Department of Justice (DOJ) announced that it is investigating Wells Fargo & Co. over accusations of violating the Servicemembers Civil Relief Act when the Bank allegedly improperly repossessed vehicles owned by members of the military. In most circumstances, firms must obtain a court order before seizing assets from soldiers, sailors, airmen and Marines. Wells Fargo, which has faced previous accusations of not adhering to military lending law, has branches on eight U.S. military bases and sells a specific set of consumer products to military members.

Goldman Sachs Group is being sued by a private equity firm for fraud and breach of fiduciary duty. The firm, which is the largest shareholder of EON Capital, alleges that Goldman concealed a conflict of interest involving the Malaysian Prime Minister while it was advising EON to accept a takeover bid by Hong Leong Bank.The Prime Minister’s brother is one of the directors of Hong Leong Bank. While Goldman Sachs was advising EON on the bid, the company was also serving as an advisor to 1MDB, the development fund established by the Prime Minister (1MDB is separately facing charges of fund misappropriation). The suit claims that EON Capital was advised to accept the bid from Hong Leong Bank, even though it could have received more from other bidders.

Finally, the House Financial Services Committee released a staff report regarding its investigation into the DOJ’s 2012 decision to not prosecute HSBC North America Holdings over its failure to comply with anti-money laundering (AML) rules. The Committee alleges that the DOJ was not transparent to the public over explaining why it chose not to prosecute HSBC. Subpoenaed Treasury records show that the internal recommendation by the Department was to indict the Bank, but this was overruled by senior DOJ leadership due to concerns about the negative shocks that it might bring to the financial system.


Lauren Rosenberg

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