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Banks behaving badly: a roundup

Bank Sign in Gold
Getty Images / George Clerk
Behaving badly
By Stephanie Gruner Buckley
Published Last updated This article is more than 2 years old.

UBS is in the spotlight today in the latest “banks behaving badly” story. Its German subsidiary is being investigated on suspicion of illicitly transferring client funds to Switzerland, and circumventing tax authorities. Today is just the latest chapter in an ongoing saga. In September, the company’s Paris headquarters, as well as offices in Strasbourg, Bordeaux, and Lyon, were raided as part of a tax evasion probe. Earlier this week, a former UBS employee, Christos Bagios, pleaded guilty in a US court to charges that he helped Americans hide up to $500 million while at the bank. In 2009, the bank paid $780 million in fines to settle similar charges with the US government.

Each week seems to bring a fresh bad banks story. With so many of them in the press, it’s growing harder to keep track of who’s done what. Here’s a quick roundup of some of recent scandals, along with the banks involved, who’s been hurt, and the penalties paid.

PPI Loans

Selling customers unnecessary insurance. Banks sold customers payment protection insurance (PPI) alongside things like mortgages and loans to cover sickness, accidents, and unemployment. It was expensive and sometimes sold without their knowledge.

Who’s involved. Barclays, Lloyds, Royal Bank of Scotland, and Santander.

Who suffered. Customers who paid for unnecessary insurance.

Who paid. More than €12 billion has been set aside to compensate customers.


Attempting to manipulate the London Interbank Offered Rate. This summer, major banks were accused of trying to rig LIBOR, a benchmark rate tied to more than $300 trillion worth of business loans, mortgages and other financial products.

Who’s involved. Banks under investigation or fined include Bank of America, Bank of Tokyo Mitsubishi, Barclays, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JPMorgan Chase, Lloyds, Norinchukin Bank, Rabobank, Royal Bank of Canada, Royal Bank of Scotland, Société Générale, UBS, and West LB.

Who suffered. Theoretically, some investors and ordinary consumers may have paid more in interest payments on their financial products or home loans (though some will also have paid less, because banks sometimes attempted to rig rates lower to make themselves look healthier).

Who paid. So far only Barclays has paid an actual fine ($450 million), though other banks are likely to follow as US, UK, Canadian, and Japanese regulators continue to investigate. Last week, Royal Bank of Scotland announced that it was cooperating with regulators and expected to incur financial penalties.

Money Laundering

Failing to comply with money laundering rules. US officials have alleged that by failing to perform basic money-laundering protections, banks have allowed millions, if not billions, of dollars from drug dealers, terrorists, and countries under sanctions such as Iran, Cuba, and Myanmar to illegally move money into the US.

Who’s involved. HSBC, Citigroup, Standard Chartered, ING Bank, and Wachovia.

Who suffered. Really, everyone.

Who paid. HSBC has set aside $1.5 billion to cover possible fines. This past June, ING Bank paid $619 million to settle allegations that it illegally moved money from Cuba and Iran. In August, Standard Chartered paid $340 million to settle with New York regulators allegations that it hid transactions with Iran. And back in 2010, Wachovia agreed to a $110 million settlement for failing to stop drug money being laundered through its bank accounts.

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