Criminalizing bankers for white collar and corporate crimes: Are we coming to the era of collective punishment?

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For a very longtime there was the myth that bankers commit white collar crimes (crimes committed by a person within an organisation for his or her selfish interests) and corporate crimes (crimes committed by employees on behalf of their employers) which do not cause any harm to any person. This view however was challenged following the banking crises of 2008 in which the economy of the world was plunged into turmoil and a large number of people either lost their home or job or both. There are now attempts by policy makers and financial regulators to criminalise banking crimes with criminal sanctions in the form of prison terms for bankers who are found guilty of banking offences. Capping the amount of bonus that bankers can receive at any particular period of time is also another measure being explored as a way of reducing banking crimes. The issue that arises however is whether these measures are necessary and whether they can help to reduce bankers’ appetite for financial gains attributable to most of the recent banking crises.

Criminalising banking crimes with criminal sanctions for bankers who participate in them is long overdue. Until now white collar and corporate crimes which are committed within the banking sector have not been considered as serious crimes. They are labelled as banking malpractices and bankers involved in them were not punished. Instead, financial regulators tried to impose financial sanctions on employers whose employees were involved in such banking crimes. Consequently, bankers involved in massive financial crimes do not learn any lessons from them but live to commit frauds another day.

Critics have long argued that collective punishment given to banks for banking frauds committed by bank employees cannot be justified. They try to point out the hypocrisy in the way in which legal systems are the world are designed to handle banking crimes differently to street crimes. Bankers responsible for financial crimes involving millions of pounds are not prosecuted and punished for the crimes. In contrast, individuals committing street crimes such as attempting to supply small amount of drugs or shoplifting of baby formula at a supermarket are prosecuted and sent to jail. The critics further argued that if street crimes are considered as serious offences and individuals committing them are being held to account, then banking crimes should also be viewed as serious crimes and people responsible for them should be held individually accountable for the misdeeds.

The extent to which sending bankers to jail for banking offences could help to deter future bankers from engaging in such offences is debatable. After all there are a number of criminal sanctions including the death penalty and life imprisonment for serious crimes such as murder and armed robbery but these do not seem to deter die—hard offenders from committing these heinous crimes. Once there are financial benefits to be derived from a particular criminal adventure, criminals will always be tempted to engage in it.

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