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Banking & Finance Law Report

FBI increases criminal fraud investigations by 65%, director reports

Posted in Bank Lending, Collection and Foreclosure, Litigation

FBI Director James Comey shared the bureau’s enforcement trends and objectives at the New York City Bar Association’s Third Annual White Collar Crime Institute on May 19.

Comey recognized that although counter-terrorism is still a top priority for the agency, white-collar cases are receiving significant focus and resources. In the mortgage industry, agents are investigating foreclosure rescue companies preying on stressed homeowners and criminals who target senior citizens with the lure of reverse mortgages. In money laundering, enforcement targets are involved in a buying anonymous prepaid credit cards, using of “virtual currency” to transfer money and using smaller institutions to inject money into the banking system. In securities markets, the FBI also is targeting micro-cap market manipulation, insider trading and accounting fraud.

Comey emphasized in his remarks that the FBI has received additional resources from Congress, which allowed the agency to hire 2,000 people this year. In addition, he disclosed that more than 1,300 agents are working more than 10,000 white collar crime cases. These figures represent a 65% increase in the number of criminal fraud cases investigated by the FBI since 2008.

The director refuted the sentiments of some commentators that federal authorities are not locking up enough “corporate pirates.” In defending U.S. Department of Justice prosecution policies, he argued that to prosecute corporate fraud, agents must “examine the contents of someone’s mind.” Comey said: “In this country, we put people in jail when we prove they knew they were doing something criminally wrong. That’s hard, but its right.”

Comey also rejected the suggestion that some corporate defendants were “too big to jail.” He pointed to the fact that only human beings can commit criminal acts and that corporations can’t go to jail. He also reminded his audience that holding institutions accountable can lead to structural and operational change, which in turn can change the priorities and policy of the institutions. He also defended the use of deferred prosecution agreements and civil settlements because of the deterrent effect on corporate boards, shareholders and employees to correct issues within institutions.

He confirmed that a priority of law enforcement is to “create incentives in the space for leaders in private enterprise to grow healthy cultures.” He rejected the idea that you can “train” your way to healthy corporate culture, but instead emphasized that corporate boards must choose good, ethical leaders who insist upon developing ethical underlings. The removal of compromised leaders is also required. Comey’s comments echoed those of the DOJ, which encourage self-reporting and transparency to create strong compliance practices.