When is a simple fine insufficient for anti-money laundering rules infractions or violations of the Foreign Corrupt Practices Act, U.K. Bribery Act, or banking frauds such as the LIBOR scandal?
Was the penalty assessed by the U.K. Financial Conduct Authority to Barclays CEO Jes Staley for his attempts to unmask an anonymous, internal whistleblower punishment enough? While Staley paid the unreported fine, it now appears that a high-ranking official at French bank SociétéGénérale (SocGen) paid another type of price for a violation—he lost his job.
Barclays Chief Executive Officer Didier Valet departed from the bank in March “following a divergence of approaches regarding management of a specific legal matter.” Now it appears the reason for the employment separation was that the bank would have faced much tougher penalties from the Justice Department if Valet had not resigned over accusations of LIBOR rate-rigging. While it is not clear if U.S. authorities demanded this action, they had accused Valet of being aware of the bank’s lowballed LIBOR rates, which led to market manipulation.
Certainly, one of the factors in the U.S. Sentencing Guidelines is the discipline an organization metes out to those culpable for bad conduct. This was most recently driven home by the Commerce Department’s additional sanction on the Chinese telecom ZTE for its failure to discipline employees who were involved in trade violations at the heart of the enforcement action. Of course, ZTE added fuel to the fire by telling regulators the recalcitrant employees had been disciplined, which is never good to do.
The bottom line is that U.S. regulators want companies to take firm disciplinary action against employees who are involved directly—or even indirectly—in the conduct at the heart of any violation.
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