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It makes the point that governments "punish" these crimes with the velvet glove on. None of those fines are anywhere close to the point they'd endanger even one

It makes the point that governments "punish" these crimes with the velvet glove on. None of those fines are anywhere close to the point they'd endanger even one yearly profit of these institutions. Now try being suspected of tax cheating as a smaller company and see how governments punish that (not "convicted" mind you, "suspected", meaning you likely did nothing wrong, and even if you did there's a decent chance it's an accident/lack of knowledge/... rather than outright fraud). Let's see government limit themselves to not endangering even one year's profitability then.

sokoloff 8y ago
I think it's unreasonable to consider fining a bank based on the yearly profits of the bank. If a bank does hundreds of billions of dollars of transactions globally and several hundred million of those are tainted, the sanctions in question should be based on the tainted transactions, not the annual revenue or profits. If a small bank does $100M of tainted transactions and a large bank does the same, they should be fined the same, IMO. Your point about the small company is not an analog in my opinion. If you have $500K in profits and a tax cheating penalty of $1MM, it does not follow that the precedent is that tax penalties are 2x annual profits, but rather that tax penalties are proportionate to the tax cheating. If another company has a tax fraud of 50x the scope and 1000x the profits, their tax fraud fine should be 50x yours, not 1000x yours.
- magpi3 8y ago
  > If a bank does hundreds of billions of dollars of transactions globally and several hundred million of those are tainted, the sanctions in question should be based on the tainted transactions, not the annual revenue or profits If the penalty is meant to be a deterrent, then it should hurt. Otherwise it will not be a deterrent. You have to consider the bank's annual profit if you want it to hurt.
  - sokoloff 8y ago
    I believe that the annual profit on that tainted line of business is typically proportional to the size of that line of business, not to the sum of unrelated lines of business and that fines based on the size of fraud/error are appropriate deterrents. Imagine if See's Candy has a product recall due to malfeasance or NetJets has a crash based on pilot error. Should any penalties be based on the facts and circumstances of the situation or on the entire profits of Berkshire Hathaway?
  - leetcrew 8y ago
    depends on your philosophy regarding fines/punishment. personally I think punishments, particularly fines, should be proportional to the damage done to society, not jacked up as high as you feel is necessary to discourage the behavior. I don't think a large bank that does $50mm in illegal transactions did any more harm than a small one that did the same volume. also, as we see in criminal law, setting huge penalties doesn't work very well if you can only get a few convictions. it just turns into a game of hot potato where everyone still does the illegal thing to stay competitive and some unlucky firm occasionally gets stuck holding the bag. a free society should strive for reasonable penalties that are consistently enforced.
    - sokoloff 8y ago
      I would say that deterrence is a valid goal. Imagine tax fraud. If the revenue office estimates that approximately 10% of tax fraud is caught, then the penalty for tax fraud should be at least 10x the amount of the fraud. Anything less than that makes it +EV to cheat. (Obviously, it's not perfect and relies on estimations, but I do think that mathematically sound deterrence is desirable.) This of course is still proportional to the fraud (and the societal damage), not to the overall revenues or profits of the taxpayer in question.
      - leetcrew 8y ago
        I should have elaborated more on my original post. I think creating a negative EV is a reasonable goal, but only under certain conditions. > If the revenue office estimates that approximately 10% of tax fraud is caught, then the penalty for tax fraud should be at least 10x the amount of the fraud. this, imo, is the exact situation that creates the game of hot potato. people stop making decisions based solely on EV when the variance gets too high. setting a huge penalty to create -EV may discourage the largest, most forward-looking institutions from engaging in the bad behavior (or at least directing it in a top-down fashion), but most companies and individuals with a shorter time horizon are just going to ignore it. and since everyone does it but almost no one gets caught, it creates an easy way to single out politically useful targets and throw the book at them. rather than just increasing the penalty to gain ratio, I think it is more productive to ask why it is so hard to enforce these laws in the first place. tax law, for instance, can be so complicated that it is unclear to everyone involved (enforcement, accountants, defense counsel) whether a particular strategy is legal. when wrongdoing is difficult to understand, let alone prove, the government should simplify the laws, not make them more draconian. it wouldn't hurt to spend a little more on enforcement either.
- crdoconnor 8y ago
  It also only really impacts shareholders. Sarbanes Oxley demonstrated with clarity how to fix this: pierce the corporate veil and send executives who commit crimes (or allow crimes to be committed under them) to jail. It's a matter of political will and power, nothing more.
- aepc2 8y ago
  Gdpr demands more of bigger organisations. Because those organizations have the capability and thus responsibility to make sure gdpr is followed. The same could be asked in this case. The big bank is better equipped to catch dirty transactions. Thus they should maybe be penalised according to size.
  - cm2187 8y ago
    Gdpr deals with intangible damages. What is the loss of privacy of 100 millions users worth? It's not really comparable.
- Spooky23 8y ago
  The rules are different for a small institution. If the “Regional Bank and Trust Co” is pervasively laundering money, the principals go to jail.

sokoloff 8y ago

I think it's unreasonable to consider fining a bank based on the yearly profits of the bank. If a bank does hundreds of billions of dollars of transactions globally and several hundred million of those are tainted, the sanctions in question should be based on the tainted transactions, not the annual revenue or profits. If a small bank does $100M of tainted transactions and a large bank does the same, they should be fined the same, IMO. Your point about the small company is not an analog in my opinion. If you have $500K in profits and a tax cheating penalty of $1MM, it does not follow that the precedent is that tax penalties are 2x annual profits, but rather that tax penalties are proportionate to the tax cheating. If another company has a tax fraud of 50x the scope and 1000x the profits, their tax fraud fine should be 50x yours, not 1000x yours.

magpi3 8y ago
> If a bank does hundreds of billions of dollars of transactions globally and several hundred million of those are tainted, the sanctions in question should be based on the tainted transactions, not the annual revenue or profits If the penalty is meant to be a deterrent, then it should hurt. Otherwise it will not be a deterrent. You have to consider the bank's annual profit if you want it to hurt.
- sokoloff 8y ago
  I believe that the annual profit on that tainted line of business is typically proportional to the size of that line of business, not to the sum of unrelated lines of business and that fines based on the size of fraud/error are appropriate deterrents. Imagine if See's Candy has a product recall due to malfeasance or NetJets has a crash based on pilot error. Should any penalties be based on the facts and circumstances of the situation or on the entire profits of Berkshire Hathaway?
- leetcrew 8y ago
  depends on your philosophy regarding fines/punishment. personally I think punishments, particularly fines, should be proportional to the damage done to society, not jacked up as high as you feel is necessary to discourage the behavior. I don't think a large bank that does $50mm in illegal transactions did any more harm than a small one that did the same volume. also, as we see in criminal law, setting huge penalties doesn't work very well if you can only get a few convictions. it just turns into a game of hot potato where everyone still does the illegal thing to stay competitive and some unlucky firm occasionally gets stuck holding the bag. a free society should strive for reasonable penalties that are consistently enforced.
  - sokoloff 8y ago
    I would say that deterrence is a valid goal. Imagine tax fraud. If the revenue office estimates that approximately 10% of tax fraud is caught, then the penalty for tax fraud should be at least 10x the amount of the fraud. Anything less than that makes it +EV to cheat. (Obviously, it's not perfect and relies on estimations, but I do think that mathematically sound deterrence is desirable.) This of course is still proportional to the fraud (and the societal damage), not to the overall revenues or profits of the taxpayer in question.
    - leetcrew 8y ago
      I should have elaborated more on my original post. I think creating a negative EV is a reasonable goal, but only under certain conditions. > If the revenue office estimates that approximately 10% of tax fraud is caught, then the penalty for tax fraud should be at least 10x the amount of the fraud. this, imo, is the exact situation that creates the game of hot potato. people stop making decisions based solely on EV when the variance gets too high. setting a huge penalty to create -EV may discourage the largest, most forward-looking institutions from engaging in the bad behavior (or at least directing it in a top-down fashion), but most companies and individuals with a shorter time horizon are just going to ignore it. and since everyone does it but almost no one gets caught, it creates an easy way to single out politically useful targets and throw the book at them. rather than just increasing the penalty to gain ratio, I think it is more productive to ask why it is so hard to enforce these laws in the first place. tax law, for instance, can be so complicated that it is unclear to everyone involved (enforcement, accountants, defense counsel) whether a particular strategy is legal. when wrongdoing is difficult to understand, let alone prove, the government should simplify the laws, not make them more draconian. it wouldn't hurt to spend a little more on enforcement either.
crdoconnor 8y ago
It also only really impacts shareholders. Sarbanes Oxley demonstrated with clarity how to fix this: pierce the corporate veil and send executives who commit crimes (or allow crimes to be committed under them) to jail. It's a matter of political will and power, nothing more.
aepc2 8y ago
Gdpr demands more of bigger organisations. Because those organizations have the capability and thus responsibility to make sure gdpr is followed. The same could be asked in this case. The big bank is better equipped to catch dirty transactions. Thus they should maybe be penalised according to size.
- cm2187 8y ago
  Gdpr deals with intangible damages. What is the loss of privacy of 100 millions users worth? It's not really comparable.
Spooky23 8y ago
The rules are different for a small institution. If the “Regional Bank and Trust Co” is pervasively laundering money, the principals go to jail.