Working Together for the Integrity of the Financial Markets

Today I had the privilege of meeting with prosecutors from the Department of Justice, agents from the FBI and IRS, and enforcers from the U.S. Securities and Exchange Commission, the U.S. Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corporation’s Office of Inspector General, the Federal Reserve, the state of New York and the United Kingdom, all of whom are committed to ensuring the integrity of financial markets.  The meeting, hosted by the Antitrust Division’s New York Office, provided a forum for this dedicated group of public servants to talk about how we can continue to work together to achieve our shared goal.

Customers and businesses around the world rely on financial institutions to deal with them fairly, act as honest brokers and be good stewards of their investments.  When these institutions don’t live up to those legitimate expectations—when they are reckless or engage in theft, fraud or collusion—recent painful experience shows the damage they can cause to individual consumers and our entire economy.  The department, along with other enforcers in the United States and elsewhere, takes seriously our responsibility to hold institutions and their executives accountable for bad behavior and to deter such conduct from happening again.

Cooperation and collaboration are vital to our success.  When we work together with our law enforcement partners, we are better able to tackle complicated and problematic behaviors, minimize duplication and accelerate favorable outcomes, and enhance and strengthen the impact of each agency’s efforts.  Close coordination benefits the subjects of the investigation, too, by minimizing repetitive requests for information and conflicting demands.

We discussed recent examples of successful joint efforts.  There are many.  Over the past several years, the Residential Mortgage Backed Securities (RMBS) Working Group brought together the department, including U.S. Attorneys’ Offices and other federal and state enforcers, to investigate fraud and misconduct in the sales of RMBS in the lead up to the financial crisis—securities that resulted in billions of dollars of losses for investors along with sweeping harm to homeowners and the broader economy.  Thus far, these efforts have resulted in over $42 billion in penalties, compensation and other relief, including billions of dollars paid or credited back to struggling homeowners. 

The department has also worked with the Department of Housing and Urban Development, the Consumer Financial Protection Bureau and attorneys general from 49 states and the District of Columbia in reaching unprecedented settlements with the nation’s largest mortgage servicers for “robo-signing” and other abusive mortgage servicing practices.  These include the 2012 National Mortgage Settlement, a landmark $25 billion settlement with the five largest mortgage servicers; a 2014 settlement with SunTrust for $968 million; and, in February of this year, a $470 million settlement with HSBC.  All of these settlements required the financial institutions to provide various forms of consumer relief and implement new standards for servicing mortgage loans and handling foreclosures, and for ensuring the accuracy of information provided in federal bankruptcy court.  The banks’ compliance obligations are overseen by an independent monitor and a joint federal-state monitoring committee.

Our cooperation is not limited to agencies in the United States.  Over the past few years, officials at the department coordinated with more than a dozen agencies, including those in the United Kingdom and Switzerland, to expose corruption in the foreign currency exchange market.  In 2015, the department announced parent-level guilty pleas from four major international banks in connection with the Antitrust and Criminal Division’s joint investigation into collusion and fraud in foreign exchange markets.  Those plea agreements included more than $2.5 billion in criminal fines and penalties.  In addition to the guilty pleas, UBS breached the terms of an earlier deferred prosecution agreement and agreed to plead guilty to a one-count felony charge of wire fraud in connection with a scheme to manipulate the London Interbank Offered Rate (LIBOR), a critical benchmark rate for countless business dealings, and pay a criminal penalty of $203 million.  Our colleagues at the United Kingdom’s Financial Conduct Authority collected $1.9 billion in penalties from these same banks and HSBC, and the Swiss Financial Market Supervisory Authority collected $145 million in penalties from UBS.   

Our collaborative efforts included holding individuals accountable for financial wrong-doing.  Earlier this year a joint Criminal Division and Antitrust Division trial team convicted two traders who manipulated LIBOR.  These convictions are just one of the many successes that arose out of a diligent and wide-ranging collaboration among various enforcement agencies from the CFTC’s Division of Enforcement, the U.K. Financial Conduct Authority and the U.K. Serious Fraud Office.  More than 20 individuals have been charged by the U.K. Serious Fraud Office for their roles in engaging in benchmark rate manipulation.

Our actions were successful because each agency appreciated the role other enforcers needed to play, regularly talked with each other and continually worked toward prompt and favorable outcomes. 

We have made great progress in combatting fraud in our financial markets and today’s meeting represents another building block in our cooperative efforts.  I know there is more work to be done, and I’m confident that these talented enforcers will continue working together to ensure the integrity of financial markets—to insist that these markets work for the benefit of all investors.  Our work is far from done.  I fully expect that the Department of Justice and our enforcement partners will continue to take action on these issues in the weeks and months to come.