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Feds Threatening Criminal Charges Against Misbehaving Banks

Federal prosecutors are rethinking settlement deals with banks that aren’t “behaving” as promised following so-called deferred prosecution agreements.

Turns out some of the largest banks in trouble with the Feds failed to disclose the full extent of wrongdoing in the original settlements, and are still committing some of the same practices they got in trouble for. So prosecutors are threatening to revoke the settlements and either impose heavier fines or force the banks to plead guilty to criminal charges, reported The New York Times.

Prosecutors have reopened investigations into British bank Standard Chartered and the Bank of Tokyo-Mitsubishi UFJ , both of which were accused of dealing with Iran and other countries blacklisted by the United States, and both of which are suspected to have downplayed their wrongdoings.

Prosecutors often rely on consulting firm — chosen and paid by the bank it’s investigating — for a report of a given bank’s wrongdoings. PricewaterhouseCoopers, which advised the Japanese bank, apparently watered down the report it sent to government investigators, and is now also under investigation.

Prosecutors are also threatening to revoke settlements with Barclays and UBS, because they aren’t holding up their end of the deal, which is to quit manipulating interest rates and foreign currencies, The NYT reported.

These settlements, which generally involve a fine and a probationary period of a few years, are supposed to protect the bank from the fallout of criminal charges, but don’t seem to change the cycle of misbehavior.

Since 2001, eight big banks have broken the terms of deferred prosecution settlements, reported The NYT.

In a recent case against a French bank, BNP Paribas, its lawyer told prosecutors it was simply too big to plead guilty to criminal charges. The lawyer gave prosecutors a fake news report that the bank failed, and explaining the consequences. Prosecutors didn’t heed the lawyer’s warning, and the bank faced criminal charges. A few weeks later BNP’s executive reported another solid quarter.

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