NPA Means No Prosecution Agreement

I have written about DPA‘s before, so, it shouldn’t be surprising to find out that there is an NPA as well. Obviously, NPA is a better deal than a DPA, although often a DPA is a de facto NPA.

Leslie Caldwell
Leslie Caldwell

Leslie Caldwell, Assistant Attorney General, is reported to having told ACFE (Association of Certified Fraud Examiners)  that NPA’s and DPA’s may be taken back and financial institutions could be forced to plead guilty.

This isn’t earth shattering news for big banks since most of them have plead guilty to something over the last couple of years. Caldwell’s statement comes when many of the major problems of the 2008 financial crisis are coming to a close, raising concerns about whether legal reserve funding has been adequate. The fines have been, at times, in the tens of billions of dollars, so this is a big deal. One bank, does doesn’t matter which one so I won’t name it, was fined more than the income earned on the activity that generated the income to begin with. These fines are no longer just a slap on the wrist. It is a warning for bank to brace themselves. And they had better make sure their businesses are ready to comply going forward, not just mitigate the damages of the past. Otherwise, they will be facing negative returns.


Marcus Maltempo is a Certified Anti-Money Laundering Specialist and a Certified Fraud Examiner with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. 

Whistleblower’s Tight Rope

Whistleblowers are a tough issue to deal with in terms of compliance. On one hand, they usually have to break a lot of corporate policies to blow the whistle. On the other hand, they are a witness to criminal or immoral activity in the workplace. Ideally, whistle blowing is not necessary. Ideals are not the reality.
from Human Capital Catalyst

Generally, corporations are good business entities that do not break the law or harm others. Society benefits by having legal entities that can continue a business even when the founders are no longer willing or able to run it.

For the whistleblower, a wrong must be performed to expose another wrong. Regardless of corporate policy, sharing the secrets of the corporation is legal and immoral. So, whistleblowers need compelling reasons to cross that good-bad line. Obviously, letting one’s superiors and the corporation’s compliance department is important. But if nothing is being changed, then the whistleblower is compelled to cross the good-bad line. Who to contact next is difficult to figure out. Some industries or activities do not have regulators. In such a situation, the default government entity to contact is the Federal Bureau of Investigations, FBI. The FBI may advise the whistleblower on what to do next. The FBI may even advise the whistleblower that the suspect activities related to them are not crimes. But the FBI may suspect the whistleblower is/was somehow involved and wants to get out of a bad situation in the whistleblower’s own interest. In the last situation, the FBI has had a reputation of protecting bad actors who report bad behavior if they own up to their bad behavior when reporting large crimes. Whistleblowers may still be tried for their crimes, but might get reduced sentences, vacated sentences, immunity, or delayed prosecution agreements, DPA. DPA’s are generally reserved for financial institutions, though, not individuals. And also DPA’s are effectively a pass on conviction. There maybe a hefty fine associated with it but it still means a clean criminal record, which is of great value in many part of the developed world.

Whistleblowers really need to think these things through. Speaking with a knowledgeable and trusted attorney would be advisable before crossing corporate policy. Should one doesn’t know of an attorney through his/her network, then reading the Wall Street Journal to see who have protected whistleblowers in the past are also a good way to find them.


One bit of business: I would like to interview compliance practitioners in financial services. If you think you have something worth sharing, I would like to speak with you.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.


In Corporate Crimes, Individual Accountability Is Elusive


The Department of Justice has filed over 46,000 cases against individuals for mortgage fraud since the Great Recession. Aside from Lee B. Farkas, former Chairman of Taylor, Bean & Whitaker serving a 30-year sentence, all of the other cases have been against low level employees who do not have any name recognition or even any responsibilities for much of their organizations.
from Leom Lime Moon at Blogspot


The main take away is that managers really have no liabilities. The rationale seems to be that managers are not licensed professionals, so they don’t have a higher standard to meet. The main higher standard might be that a lack of knowledge absolves them of accountable because they do not have a professional’s training and certification. How could a non-professional be accountable for knowledge s/he has no knowledge about? A professional would be liable for knowing certain things about their work and if s/he doesn’t know, then the professional is accountable for not doing his/her job correctly.


Here’s my stance on all this. The solution isn’t to prosecute non-professional managers for things they should have known. There is nothing in corporate charters that require managers to be professionals. (Here, I’m using the word professional in the traditional sense, a person who is licensed to practice a certain craft or use certain knowledge.) The solution is to make managing professionals a profession. Currently, banks are managed by people who don’t really know how to operate their own banks; they know how to manage the people who do. But shouldn’t they know how their bank operates? The answer, in my opinion, is “yes.”

So, while I don’t believe that bank holding companies need to be managed by professionals because what is needed at that level is quite different than individual bank units, these individual units should be managed by professionals in and of that field. Projecting out, what will happen in the future with this standard in place would be that future bank holding company executives will be a banker from those units.

A small group of people have argued that bank executives are professionals because almost all of them come from investment banking backgrounds and they hold Series licenses from FINRA. The problem there is that taking away their license to sell securities does not bar them from managing a people who do, let alone other bank units. My solution would solve this for the most part because people will not be allowed to climb the ladder of another bank unit without that license required to practice in that bank unit.

Economically, what will happen is that this will allow large bank holding companies to exist. But this standard will force units to shrink and many more units be created. The pyramid will be at the state-level, and executives will be plucked from those levels. Large national banks may have multi-state regions but those will also be led by former state-level unit managers, making them at least accountable for maintaining the professional standards of one profession. Eventually, the only qualified national bank managers will be people who used to run banks.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.

DPA Means Deferred Prosecution Agreement

Deferred prosecution agreements (DPAs) encourage individuals and companies to provide the SEC with forthcoming information about misconduct and assist with a subsequent investigation. In return, the SEC refrains from prosecuting cooperators for their own violations if they comply with certain undertakings. – SEC

DPA’s are also used by the DOJ.

For a company or an individual who may have unwittingly been involved in financial crime, DPA is often the best option. There are two main types of DPA’s, with and without admission of violation.

Obviously, not admitting to violation is the best option. This option can only be provided if the violator’s intended results were not a violation in themselves. This doesn’t mean it’s the end of the violator’s troubles. The violator may face professional punishments if s/he is licensed or certified. In rare cases, the violator will be barred from the profession.
Wolf of Wall Street by Martin Scorsese via Aerometal

Admitting to the violation only strengthens the case against the violator’s disbarment. On top of that, the violator may face disbarment from the industry regardless of the function. Admission could be career suicide.

It used to be that corporations wanted to avoid admission because it meant suicide for the corporation. But last year, the regulators showed their willingness to work with corporations on leniency, if that’s what it can be called. A number of corporations entered into agreements to admit to wrong doing and pay hefty violations but DPA’s were executed in such a way so that corporations may have taken a hit to their assets, but the shareholders’ equity would not be affected.

About the Author: Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses.