Our economic crime data reveals that in the last three and a half years*, 90 percent of global fines (total $14 billion) were issued by United States (US) regulators. Of note is the fact that UK, French, German and Swiss banks, with branches stateside, paid
nearly 40 percent of the total fines relating to economic crime in the US. Some have viewed this as a US regulator bias against foreign firms. Here we look at whether this is really the case or whether there is an alternative explanation.
Enforcing with impunity
EU financial institutions are often astounded by the audacity of the US regulators, believing there is a home bias. In the US. there is a level of enforcement not seen in the EU. However, one reason for the large fines is that, in comparison to other jurisdictions,
the US sets up regulations with a specific purpose and there is a culture of rules getting enforced. As a result, the US is at the fore of punishing financial institutions with fines for acts of economic crime.
In contrast, in the EU regulations and enforcement is murkier. For instance, a comparison between the UK‘s FCA and US regulators issuing fines related to financial crimes between January 2015 and June 2018 shows US regulators handing out $12,656.6M worth
of fines. Whereas the Financial Conduct Authority (FCA) only issued $321.8 million in fines during the same period. The data therefore shows that EU financial institutions cannot operate in the US the way they do in their home territory. Rather than there
being a home bias, the US regulators enforce with impunity.
When looking at the type of economic crime fines, our data reveals sanction violations accounted for $1.4 billion (10 percent) of total economic crime-related fines between January 2015 – July 2018. All those fines were issued by US regulators and government
There are a number of reasons why EU institutions have been caught out on sanctions – none of which are because of a US. home bias. Firstly, when it comes to sanctions violations, EU institutions’ large business footprints in Asia and the Middle East makes
them vulnerable to sanctions violations. In contrast, US firms tend to have fewer high-risk clients.
Secondly, our data in fact reveals US institutions are fined at the same level or higher than EU counterparts. The average fine for US firms was lower because there were more small US firms that attracted smaller fines. This analysis therefore demonstrates
US firms are not being favoured against their European counterparts.
If US firms do have an advantage, it is that they would have been consulted about the new sanctions process when it was developed. US firms have therefore put good systems and controls in place and have the core competency to manage sanctions risk. Financial
institutions in the US are typically far more aware of the consequences of non-compliance. As a result, U.S firms often have a culture of zero tolerance for sanctions busting.
In contrast, whilst some EU firms were bad actors, many were in fact just sloppy and ignorant with regard to what was required. Some EU firms have, in the past, misunderstood the seriousness of the US regulator’s approach to sanctions until they were fined.
In many cases it is only once firms were fined that they then started to take sanctions compliance seriously.
No home bias
It doesn't matter who you are, if you bust sanctions in the US, then you'll face the consequences. EU firms have previously misunderstood the seriousness of the United States' approach to sanctions until they were fined. The reality is that EU firms cannot
operate in the US the way they do in their home territory. The economic crime fines data highlight EU-based financial institutions' weakness on sanctions compliance is to blame for the huge fines imposed on them, not a home bias.
*Data between January 2015 and July 2018