6 Bank Scandals Illustrating How Powerless Consumers Really Are


The financial sector has been riddled with scandals, corruption, and losses for several centuries now. Ever since the concept of banking was invented, there has always been the risk of greed getting the best of people in charge of controlling others’ finances. Some of the recent bank scandals go to show how powerless consumers are, as well as how often events like this take place.

#6 LIBOR (2012)

In the year 2012, the LIBOR scandal caused a lot of public outrage. That is only to be expected, as various banks were found guilty of inflating and deflating their interest rates to profit from trades. The LIBOR average interest rate underpins US$350tn in derivatives, which means this scandal was nothing less than a large-scale price-fixing scandal. In fact, it may have been the biggest of its kind to ever be recorded.

#5 Wells Fargo Discrimination (2009)

When racism and discrimination get the upper hand in the banking sector, things go from bad to worse rather quickly. Wells Fargo paid a US$175m fine to settle discriminatory accusations. During the housing boom, the bank allegedly was less eager to loan money to Hispanic and African American clients. The fact the bank paid this sum goes to show there was some truth to these allegations after all.


#4 Kabul Bank Fraud (2010)

An undisclosed Kabul bank, based in Afghanistan, took US$861m of the Afghan economy through a large-scale fake loans scheme. These loans were issued to 19 different companies and individuals. In the end, the bank had to be bailed out, which cost 5% of the country’s GDP at that time. It is safe to say this scandal is one of the world’s biggest banking failures to be recorded to date. Rest assured it will not be the last of its kind either.

#3 Bank of America (2009)

During the month of October 2009, the SEC argued a jury trial had to be conducted where Bank of America was concerned. To be more precise, the institution allegedly misled shareholders about the bonuses paid to Merrill Lynch employees before both institutions merged. However, the SEC opted not to disclose the names of the executives and lawyers vetting these bonuses. Bonuses in the financial sector have always been subject to speculation, as many feel they should not be paid out during these harsh economic times.

#2 HSBC’s Insufficient AML Rules (2012)

The US Senate did not take kindly to HSBC bank in 2012 after it became apparent the bank’s lackluster AML precautions allowed Mexican drug cartels and Iranian terrorists to gain access to the US Dollar. By blocking transactions involved terrorists and criminals, HSBC felt they had done enough to prevent these problems. In the end, the bank had to pay US$1.9bn in fines to both US and British regulators.

#1 Wells Fargo Fraudulent Accounts (2016)

The year 2016 was not a good one for Wells Fargo and its customers. The bank created millions of bogus accounts without alerting their customers of this practice. The group was forced to pay US$185m in fines, which seemed far too low at that time. Over 5,000 employees were involved in creating and managing these accounts as they aimed to meet sales quotas and earning bonuses. Consumers are absolutely powerless against such schemes.

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