“You don’t find the smoking gun e-mail where an executive says, ‘I know it’s drug money, but go do it anyway,“’ said Evan Weitz, a New York federal prosecutor, during a panel discussion at the annual anti-money laundering conference.
Instead, prosecutors usually target the bank or financial institution itself. Adam Kaufmann, chief of the investigative division of the Manhattan district attorney’s office, said even then the preferred practice is to work out a settlement — known as a deferred prosecution agreement — rather than indicting the institution.
“An indictment can be a death sentence for a financial institution,” said Kaufmann, adding that ruining large banks or other institutions can trigger unforeseen economic ripple effects.
Major banks investigated for doing business with countries facing US economic sanctions have reached agreements four times since January 2009. In those settlements, the institutions pay large fines and agree to meet certain requirements, but no executives face jail time. Last year, US District Judge Emmett Sullivan of Washington labeled one such settlement a “sweetheart deal.” In that settlement, Barclays Bank paid $298 million in penalties but faced no charges.
“Why isn’t the government getting rough with these banks?” Sullivan said at an August 2010 hearing.
In such cases, Kaufmann said, prosecutors could have indicted lower-level employees who are actually handling the illegal transactions on a day-to-day basis. But that wouldn’t get at the executives who made the decisions — and figuring out exactly who that is can be daunting.
“It becomes very difficult to sort of identify the person you want to prosecute,” he said.
Earlier, Manhattan District Attorney Cyrus R. Vance Jr. told the more than 1,000 conference attendees that prosecutors and investigators increasingly work alongside bank regulators to spot money-laundering trends involving drug traffickers, corrupt foreign officials and even terrorist financiers. Attendees are part of a diverse group that includes prosecutors, financial officials and regulators from around the world.
Vance said the intent is not only to prosecute financial institutions.
“We want to help you detect criminal conduct,” Vance said. “It can’t just be about filing indictments.” Toward that end, bank regulators told the conference that even in tough economic times, it’s unwise to scrimp on compliance with tough rules requiring reporting of suspicious activity or to turn a blind eye toward potentially risky customers.
“You don’t want to make the slide from witness to target” of a criminal probe, said Federal Reserve compliance official Suzanne Williams. “The answer can’t be that you did nothing.”
