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with governmental agencies around the world may face. The risks are multifold: costs associated with “shakedowns” of corrupt officials, loss of reputation, and, of course, the financial consequences of prosecution.

      • German manufacturer Siemens paid fines and other penalties totaling $1.6 billion in the United States and Germany after pleading guilty to violations of the U.S. Foreign Corrupt Practices Act (FCPA) in 2008. The company admitted that bribery had become a common way win government contracts around the globe.22

      • Alstom, a French power and transportation company, paid a $772 million fine in 2015 for FCPA charges related to a widespread corruption scheme involving at least $75 million in secret bribes paid to government officials in numerous countries; falsifying its books and records; and failing to implement adequate internal controls.23

      Antitrust regulations in most countries aim to foster open competition and prevent market-share leaders from artificially manipulating price, supply, and other factors. What constitutes anticompetitive behavior is in the eye of the beholder, varying from country to country and court to court. As a result, some companies may face costly litigation for what they feel are legitimate business practices. Others, however, clearly intended fraudulent activity.

      • After years of litigation, Visa and MasterCard reached a $7.25 billion settlement in 2013 for a class-action lawsuit claiming that the companies conspired to force merchants to pay excessive fees and follow onerous rules for accepting their credit cards. The settlement was recently thrown out by a federal appeals court as “unfair to retailers.”24

      • In 2014, chip-maker Intel paid a $1.45 billion fine in Europe for unfair and damaging practices against its rival AMD. This was in addition to a $1.25 billion settlement with the United States in 2009.25

      • Taiwan-based AU Optronics paid $500 million in the United States for participating in a conspiracy to fix prices on LCD panels. Two of the company's senior executives were sentenced to three years in prison and fined $200,000. The Justice Department claimed that AU Optronics was part of a price-fixing cartel involving every major manufacturer of standard-sized LCD panels, including LG and Samsung.26

      Mortgage Underwriting

      • Bank of America paid a cumulative total of $50bn in U.S. government settlements between 2009 and 2014, when it coughed up a record $16.65 billion to resolve allegations it misled investors in its mortgage-backed securities.27 In similar cases, JPMorgan Chase paid $13 billion,28 and Citigroup $7 billion.29

      Foreclosure Practices

      • In 2012, the U.S. Federal government and state attorneys general reached a $25 billion agreement with the nation's five largest mortgage servicers: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial. Violations included the use of “robo-signed” affidavits in foreclosure proceedings, deceptive practices in the offering of loan modifications, failures to offer alternatives before foreclosing on federally insured mortgages, and filing improper documentation in federal bankruptcy court.30

      • The following year, 13 mortgage servicers, including Bank of America, Wells Fargo, and JP Morgan Chase, paid $9.3 billion to settle similar charges.31

      Department of Justice Prosecutions are risks that any U.S. company faces not just for intentionally fraudulent behavior, but also as a result of unintended negligence.

      • Anadarko Petroleum paid a record $5.15 billion in 2014 to settle a DoJ prosecution over toxic waste at about 4,000 locations over decades caused by a company it had acquired in 2006.32

      • In 2012, BP paid $4.525 billion and pled guilty to 11 counts of manslaughter, two misdemeanors, and a felony count of lying to Congress and agreed to four years of government monitoring of its safety practices and ethics over the 2010 Deepwater Horizon spill. In 2015, the company paid an additional $18.7 billion in fines.33

      SEC Actions: Though it has been criticized for not coming down hard enough on financial institutions whose risky behavior triggered the 2008 meltdown, the SEC is still a force to be reckoned with, pursuing violations of disclosure and other regulations.

      • In 2010 Goldman, Sachs & Co. paid $550 million and agreed to reform its business practices to settle SEC charges that the firm misled investors in a subprime-mortgage product just as the U.S. housing market was starting to collapse.34

      • In 2012 BP paid a $525 million penalty to the SEC for securities fraud stemming from the Deepwater Horizon spill. The SEC charged the company with misleading investors by significantly understating the oil flow rate in multiple reports filed with the commission.35

      Trading Losses: Organizations trading in the financial (and energy) markets can suffer large losses due to unauthorized activities or trades executed beyond reasonable limits.

      • In January 2008, the French bank Société Générale lost approximately $7 billion due to fraudulent transactions created by a trader with the company.36

      • In the infamous “London Whale” incident, a team of JPMorgan Chase traders bet on derivatives in 2012 that ultimately cost the bank $6.2 billion. Moreover, JPMorgan Chase later paid about $920 million in fines to U.S. and U.K. regulators for engaging in “unsafe and unsound practices.”37

      Anti–Money Laundering has become a hot-button issue for governments with the growth of terrorism and illicit drug trade. Financial institutions that turn a blind eye to suspicious behavior (or actively solicit it) face heavy fines and tremendous reputational damage.

      • In 2013, HSBC, Europe's largest bank, paid $1.9 billion in an agreement with the United States to resolve charges it enabled Latin American drug cartels to launder billions of dollars. HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from its Mexico subsidiary. The bank was also accused of violating U.S. economic sanctions against Iran, Libya, Sudan, Burma, and Cuba.38

      • In 2014, France's largest bank, BNP Paribas, pleaded guilty to concealing billions of dollars in transactions for clients in Sudan, Iran, and Cuba in violation of U.S. sanctions and agreed to pay $8.9 billion in fines. Prosecutors say BNP, France's largest bank, went to elaborate lengths to disguise illicit transactions with sanctioned countries.39

      Market Manipulation on a global scale seems like the stuff of James Bond movies or wild conspiracy theories. But at least two major cases show that large financial institutions are exposed to significant financial and reputational damage by the actions of their employees.

      • In 2012, Swiss banking giant UBS agreed to pay U.S., U.K., and Swiss regulators $1.5 billion for its role in a conspiracy by multiple banks to manipulate the LIBOR rate that banks charge each other for short-term loans. The banks were falsely inflating or deflating their rates so as to profit from trades, or to give the impression that they were more creditworthy than they were.40

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