Barclays has agreed a $2 billion (£1.4billion) settlement with the US Justice Department over the sale of mortgage-backed securities before the 2008 financial crisis.
The settlement follows a three-year investigation into allegations that the bank caused billions of dollars of losses to investors by engaging in a fraudulent scheme to sell Residential Mortgage-Backed Securities (RMBS) between 2005 and 2007.
It was accused of misleading investors about the quality of the mortgage loans backing those deals; which the Justice Department said were “significantly less trustworthy’’ than Barclays claimed. The Justice Department alleged the bank had violated the Financial Institutions Reform, Recovery and Enforcement Act of 1989, which covers postal, wire and bank fraud.
Two former Barclays executives have also reached a settlement. They will pay a total of $2M.
The fine is less than City analysts had expected and lower than the penalties paid by other foreign banks facing similar claims. In December 2016 Credit Suisse paid $5.3 billion as a settlement and Deutsche Bank settled at $7.2 billion a month later.
Barclays may, therefore, consider itself fortunate. But any organisation, however large or well financed, must surely recognise that it is a better use of resources to have proper procedures in place for preventing and investigating such wrongdoing rather than having to pay out $2 billion when it comes to light.
Read our article: IDENTIFYING AND INVESTIGATING INVESTMENT FRAUD