Nobody would look at how the government handled white-collar fraud cases after the financial crisis, when big bankers who sent the economy into chaos escaped criminal charges and often got promoted, and see some kind of model. Nobody, that is, except for James McDonald, the new enforcement chief at the Commodity Futures Trading Commission (CFTC), an obscure US agency that oversees the $483 trillion derivatives market.
In a Monday night speech in New York City, McDonald announced a new initiative to provide significant benefits to financial institutions that “self-report” crimes and cooperate with investigators. In exchange, he said, companies might see civil penalties slashed, and in some instances, cases dropped altogether. A former federal prosecutor, McDonald noted the idea originated in gang prosecutions—he’s done a lot of those—where it made sense to let individuals report on higher-level colleagues in exchange for leniency.
“We’re committed to giving companies and individuals the right incentives to voluntarily comply with the law in the first place—and to look for misconduct and report it to us when they see it,” McDonald said, according to an official transcript.
In a vacuum, this initiative doesn’t sound that bad. McDonald seems to be committing his agency to real police work: going up the chain to find the highest-level individual who can be prosecuted for wrongdoing. And only those companies disclosing all known facts and continuing to actively investigate—including rooting out those responsible—would be eligible for a reduced fine. Oh, and they would have to make sure the misconduct didn’t happen again, either.