Every Bank Robber Needs A Getaway Car; Banker Held Accountable For Money Laundering

Last month, a Dutch appeals court ordered the public prosecutor to initiate the criminal prosecution of the former CEO of the nation’s largest bank. The court directed that Ralph Hamers be put on trial for money laundering and other crimes the Amsterdam-based banking giant ING committed during his seven–year tenure as its chief executive. Financial and legal professionals are rarely prosecuted for crimes they facilitate, and it is even rarer that senior executives, as opposed to the institution they run, are targeted. Until this decision, the indictment of Goldman Sachs bankers for their role in the 1MDB scandal was a notable exception.

The culpability of those who, like the driver in a bank robbery, facilitate a crime is not particularly controversial. We all know that the corruption that happens “over there” needs the services of bankers, lawyers, accountants and other facilitators “over here.” We like to pay lip service to the idea that “it takes two to tango” and acknowledge, at least verbally, that the financial and corporate services in the financial centers of the developed world facilitate the corruption found in large parts of the developing world.

But whether those working on anti-corruption always act upon that notion is another matter. A quick look at the Transparency International corruption perceptions index helps maintain the illusion that the rich developed world is doing well on corruption, and that, looking at the bottom of the table, corruption is really a developing-country problem. We have not really internalized the lessons of the Panama Papers, 1MDB, Danske Bank and, most recently, the FinCEN files, which shone a spotlight on the services provided by banks, lawyers and other professionals in making corruption possible.

Part of the problem is that we have a dangerous blind spot when it comes to the financial and company service provider sectors and the role they have in corruption. At worst, we consider them accessories after the fact; at best, neutral service providers, without responsibility for the funds they handle. Both perspectives miss the point.

It is fundamental that we understand how integral the services of money launderers are to those involved in the underlying, predicate crime—be it organized crime or corruption. We regard bribery or embezzlement as totally separate from the subsequent laundering, but the two are intertwined. Money laundering is not just an after-the-fact assistance rendered to someone who has already stolen the money: it is part of the entire scheme—one cannot exist without the other. No bank robber would ever plan a robbery only up until the point that he gets to the exit—he needs a getaway car, otherwise his plan won’t work. And in the same way the corrupt acts perpetrated elsewhere need the getaway car that Western bankers and company service providers offer. The fact that legally they qualify as two separate crimes should not obscure the extent to which, in practice, they are two sides of the same coin.

Last month’s judgement recognizes the essential role played by financial service providers and the responsibility of the individuals who are in charge of them.  In 2018, ING, a global systemically important bank, settled a case with the Dutch public prosecutor, when it was revealed that its lax anti-money laundering (AML) controls had enabled many instances of money laundering through its accounts. It paid a total of €775 million, consisting of a €675 million fine and confiscation of €100 million in ill-gotten gains. The bank had been warned many times by different regulators (both national and European), but it had failed to act. No individual was held accountable as the public prosecutor’s office considered it did not have sufficient evidence to mount a prosecution. The appeals court’s decision now changes that calculation. Four points from it (available here in Dutch) merit highlighting:

• The procedure was initiated by a third party, Stichting Onderzoek Bedrijfsinformatie (SOBI) (loosely translated “Foundation for the Investigation of Company Information”), a foundation set up to further the interests of shareholders and other stakeholders. It used a Dutch procedural provision that allows third parties with an interest in a case to request the public prosecutor to open a criminal prosecution. SOBI was found to have a sufficient interest in the case since one of the foundation’s bylaws clauses is to “monitor efforts to improve the integrity of companies.” That clause gave the foundation standing before the courts.
• As to ING’s own culpability (which had been dealt with in the earlier settlement), the court agreed with the public prosecutor’s opinion as expressed in the earlier settlement that it had committed criminal acts and that in the bank’s exclusive focus on profits, its attention to AML/CFT had suffered- “business above compliance,” it observes citing to the public prosecutors’ opinion. The court explicitly mentioned ING’s status, saying that “as a systemic bank, ING (…) and its CEO carry a responsibility that reaches further then only towards customers and shareholders. It is responsible for the reliability of our financial system and should contribute towards its integrity. Thus, particularly ING can be expected to operate in a socially responsible manner and to attach great importance to integrity.”
• Regarding the personal responsibility of the CEO (not addressed  in the settlement), the court concluded that that ING’s senior management was aware of the shortcomings of INGs compliance policy and that as CEO, the defendant was authorized and obliged to take measures to prevent ING’s criminal conduct but that he declined to do so, thus consciously accepting the considerable chance that the prohibited behaviors would take place.  
• The court also noted  that the CEO never took public responsibility for his actions and that the court is “not blind to the emotions and discussions triggered by the settlement with ING and the failure to prosecute the actual executives,” referring to media reports and statements by politicians.  In addition, it quoted expert opinion warning of calculating and immoral behavior if executives can buy off their responsibility by concluding a large settlement at the expense of their shareholders. The court therefore concluded that SOBI’s complaint was well founded and that Mr. Hamers should be criminally prosecuted. The final paragraph of the decision is worth quoting more extensively:

“It is important that the rule, that executives of a bank will not go unpunished if they have actually presided over prohibited acts, be reinforced in public criminal proceedings. Citizens should be able to see that the government also does not accept such conduct. The court is aware that bringing this defendant to trial will be time consuming and place a significant burden on the judiciary. Yet this should not be decisive. Adjudication also serves to confirm certain norms. (..)[and] what we hold to be important in our society and what is to be avoided.”

Now, to be clear, this decision does not mean that Mr. Hamers will eventually be found guilty— that will be up to a criminal court to decide. But this decision does significantly up the ante: a CEO of a major bank will face criminal prosecution, not because he actively tried to lure in criminals or was otherwise directly involved in laundering funds (as was the case in the Goldman Sachs indictments) but because, in focusing on ING’s profits, he didn’t heed  warnings from people both within and outside of the bank — choosing  to turn a blind eye instead.

Prosecutors have never had any qualms about prosecuting those who drove the getaway car in a bank robbery. One hopes the Goldman case and now the Hamer decision will help eliminate any reluctance to pursue those who facilitate corruption and other financial crimes, that the bar for holding high-level bankers accountable is falling.

Prosecution is a significant step forward. Moreover, it came about not because of prosecutorial initiative, but because an independent third party took the matter directly to court. Civil society: take note.

This blog was first published on the Global Anticorruption Blog.