You might think it's a crime that your local bank is paying you 0.6% interest on your checking account, while charging you 8% interest on a home equity loan, but compared to some things that some banks have apparently been doing, it's not so unseemly.
In the Charlotte Observer recently, columnist Rick Rothacker reported on how many major banks have been slapped with some fines in the past few years, for failing to observe sanctions that the United States has imposed on some countries. He cited, for example: "Bank accounts for customers in Iran. Lease agreements in Cuba. Money transfers for Libyans." And this summer, Wachovia (NYSE: WB ) "ended ties to a bank that reportedly had connections with terrorist organization Hezbollah." When asked to explain, many banks called the infractions accidental, and the U.S. Treasury Department has often agreed. Truth be told, we should remember, after all, that some of these banks are enormous international entities, almost inevitably connected to most corners of the world.
Still, fines were levied, and various infractions have been curtailed. Some good news is that the number of violations has dropped markedly over the past few years, suggesting that banks are getting the message. As Rothaker noted, "This year, [the Office of Foreign Assets Control, part of the Treasury Department] meted out 10 violations totaling $309,404 through August, compared with 158 for $2.7 million in 2003, the analysis found."
Here's a quick rundown of banks ranked by number of penalties (from 2003 through August of 2006):
Bank of New York (NYSE: BK ) , 6
Citigroup (NYSE: C ) , 6
HSBC (NYSE: HBC ) , 6
JPMorgan Chase (NYSE: JPM ) , 5
Union Bank of California, 4
Deutsche Bank, 4
Bank of America (NYSE: BAC ) , 4
American Express, 4
Wachovia, 3
So what should you do now, armed with this new awareness? Well, possibly nothing. The fines have generally not been enough to cause mayhem on the banks' financial bottom lines. And the trend is toward greater compliance, as well. But if you expect the companies you invest in to be as clean as they can be, you might want to keep an eye on this issue and watch out for banks cited for new violations.
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JPMorgan Chase and Bank of America are
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recommendations.
Longtime Fool contributor Selena Maranjian does not own shares of any companies mentioned in this article. The Motley Fool has a full disclosure policy.
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