Senator Warner had the gavel today as the Senate Banking Committee questioned financial regulators about their failure to date to pursue criminal prosecutions for big banks that have violated the law.  In recent years, a series of major violations of anti-money laundering laws by big banks have led to questions about how effective federal efforts to enforce these laws really are – and whether major banks are still ‘too big to prosecute.’

One of the most egregious examples cited was that of HSBC, which was found to have spent years laundering money for nations like Iran and Libya and groups including Mexican drug cartels and financiers of Islamic terrorist groups.   The Justice Department levied a fine against the bank but did not file any criminal charges. 

While questioning regulators from the Federal Reserve, the Treasury, and the Comptroller of the Currency’s office, Senator Warner expressed deep concerns about the failure of regulators to effectively stop or punish big banks’ illegal activity. 

“There was a statement from the attorney general the other day,” he began, referring to Attorney General Eric Holder’s comments this week that HSBC was ‘too big to jail,' “and I’d like to get some clarification from you… I do not personally believe that it can be the position of the United States Government that any institution should be too large to prosecute.”

Many of the regulators deflected blame by stating that it was the sole responsibility of the Justice Department to pursue prosecution in these cases.  Senator Warner pointed out the holes in this argument.

“There also is a concern that even short of punting all this to the Justice Department,” he stated, “there are other tools that you haven’t used.” These include injunctive relief, which can be used to immediately halt illegal activity, ‘removal activity’ penalties preventing an individual from working in the banking industry,  and having senior management ‘own’ compliance, meaning that they’d be held culpable if their bank’s compliance measures failed to prevent illegal activity.

Senator Warner expressed frustration at the limited penalties imposed on banks that committed very serious crimes. 

“I also have enormous concern about the length of time to prosecution, and the amount of potential illegal activity, and threatening activity in terms of terrorist financing, that has taken place,” and, he noted, “There have only been monetary fines.  There has not been prosecution of institutions, or of individuals.”

 “How do we ensure that we have strong compliance standards within these institutions? Each of these cases has taken years to get to the final stage…How can we intervene even before an enforcement action needs to be taken so we don’t have this long drag period?  Do we have the appropriate tools necessary and how do we make sure these tools are effectively used?” These, said Senator Warner, were questions that needed answers, and he suggested that additional hearings by the Banking Committee will be scheduled.