LIBOR fixing, money laundering and more: 2012's biggest bank finesThe biggest fines in financial services in 2012

25 December 2012

Rules on libor

From LIBOR-fixing to poor protection for money-laundering, Which? highlights some of the biggest banking fines of 2012. 

This year has seen the banking world rocked by scandals. Barclays, UBS and other banks admitted to fixing LIBOR, HSBC was fined for money-laundering protection failings, while mis-selling and poor consumer protection also drew attention from financial watchdogs. 

1. December: HSBC fined $1.9bn for failing to prevent money laundering

An investigation by the US Senate found that HSBC failed to put measures in place to prevent money laundering in its US and Mexican operations. The investigation found HSBC accounts in Mexico and the US were being used by drug barons to hide the proceeds of crime.

They also found evidence of the bank being used to transfer money to criminals and suspected terrorists in other countries such as Russia, Iran and Saudi Arabia.

2. June and December: Barclays fined £290m and UBS fined £940m for LIBOR fixing 

In June, Barclays admitted that some of its derivatives traders had been fixing the LIBOR interest rate between 2005 -2009. LIBOR - or London Inter Bank Offered Rate - is the rate at which banks will lend money to each other. 

Altering the LIBOR can make banks look less risky to investors than they actually are and it can affect the rates customers are offered on mortgages and other loans.

If your New Year's resolution is to get a better mortgage rate, take a look at our guide on how to get the best mortgage deal.  

UBS was recently fined after investigators found that some of its traders had not only been manipulating LIBOR but also EURIBOR and TIBOR – the rates used in the Eurozone and Tokyo.

Regulators in the UK and US are currently investigating the conduct of 20 other banking institutions who are thought to have been involved in rate rigging.

3.  December: Standard Chartered fined £187m for violation of US trading sanctions

UK based bank Standard Chartered was fined after US authorities found it had broken US sanctions on Iran, Burma, Libya and Sudan. The bank was accused of hiding 60,000 transactions with Iran worth $250bn over nearly a decade as well making transfers to other restricted nations.

4. November: CPP fined £10.5m for card protection mis-selling

After a long running investigation into the mis-selling of card protection insurance by the FSA, credit card insurance company CPP was fined more than £10m. CPP sold card protection for about £35 a year and identity theft insurance for £84 a year. 

The policies were marketed primarily to cover losses if a card was lost or stolen or you were the victim of identity theft. But in most cases customers who have been a victim of fraud will not be financially liable by law, rendering additional protection against fraud unnecessary.

Many customers purchased products from CPP after calling to activate their cards but instead of speaking to their bank they had been put through to a CPP salesperson. The FSA found that CPP overstated the risks and consequences of ID theft when this insurance was being sold.

The fine so far only covers direct sales by CPP but banks are also under scrutiny as most of CPP’s sales were generated through referrals from banks who in turn received commission.

5. October: Bank of Scotland fined £4.2m for failing to keep accurate mortgage records

Bank of Scotland was fined £4.2million by the FSA for failing to keep up-to-date and accurate information about 250,000 of its mortgage customers.

The bank had failed to properly integrate two separate systems for storing customer data. As a result it was unable to accurately identify which customers were eligible for a cap on its standard variable rate for mortgages. Some customers were sent potentially confusing information and others received no information at all.

6. Feburary: Santander fined £1.5m for failing to clarify levels of consumer protection

Santander failed to confirm to customers under what circumstances its structured products would be covered by the Financial Services Compensation Scheme.  The bank had sold around 2.7 billion pounds worth of structured products, often complex savings products,  between 2008 and 2010 but had not adequately informed customers over the extent to which they could be compensated on them.

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