LIBOR Sentencing won’t Change Bad Behavior

financial crime fingerprintOn Monday, August 3rd of this year, a single individual was found guilty in London and sentenced to 14 years in prison for profiting off certain fraudulent trades by participating in what many recognize to have been a systemic practice in the banking world of manipulating LIBOR rates. Tom Hayes, a former UBS and Citigroup trader, is more or less the first person to be convicted of financial crime essentially on behalf of the entire financial industry complex worldwide for any criminal activity that the industry has engaged in during this century. The presiding judge, Jeremy Cooke, made no bones about the sentence: “A message needs to be sent to the world of banking.” It’s not enough, though, and it’s not the ideal way to send the message.

In comparison, the actual multinational banking corporations involved in rigging LIBOR have all paid fines in multiple jurisdictions but not one executive, supervisor, or manager of any sort is currently due to stand trial for anything. UBS, seeing as how corporations are all “persons” now, issued a statement that this was a matter between the Serious Fraud Office (SFO) of the UK and Hayes, and that as far as the bank was concerned, it had already resolved its own involvement in the matter with “most authorities”.

Lest you think that LIBOR is some strange overseas financial thingamajig that isn’t relevant in your daily life, it is an estimated interest rate set daily in London (by a group of leading banks, of all institutions) on which over $350 trillion of financial products are based. It is the primary worldwide benchmark rate for short-term interest rates everywhere. That means it factors in to your educational, credit card, car, and home loans, among many other things.

It would be nice to think that this is the tip of the iceberg, that we’re rounding a critical corner where more white collar crimes of a financial nature are prosecuted against the individuals involved, not just against corporations that pay their way out of these messes, but it seems unlikely. Alone, the Hayes sentencing will most likely do very little to change a corrupt and arrogant culture. And Hayes does not deserve to be a poster boy nor does he deserve to carry out his prison time without some company.