EU moves to unify sanctions for financial abuse

The European Union executive launched a campaign this week for a new Europe-wide system of penalties, fines and possible jail terms in the financial-services sector in an attempt to level the playing field.

With punishment for misdemeanours such as insider trading or other market manipulation and abuses varying hugely across national jurisdictions in the EU, Michel Barnier, the single market commissioner, announced a drive to force more uniform sanctions, with a view to tabling new European laws early next year.

“This is politically honourable and economically necessary,” Barnier told the Guardian. “Sanctions are different from one country to another. I want to create an internal market in financial services. The sanctions will be transversal, affecting all major pieces of market regulation.”

Commission officials said varying conditions across the EU meant the cost of breaking the rules was often no deterrent when set against the money to be made.

Britain is reckoned to have one of the stiffest regimes in the EU. Officials point out that Goldman Sachs was fined £17,5-million recently by the Financial Services Authority for failing to report it was being investigated by the US authorities. The maximum fine for similar offences in Lithuania, is €150 000 (£127 000).

Punishment for traders and firms is currently decided and imposed by national authorities. Under Barnier’s plans, that would continue to be the case, but Brussels would have a greater say in setting more uniform rules and in policing observance.

Variations in penalties in different parts of Europe mean companies can dodge the law or minimise its impact by “doing business where sanctions are weakest or least likely”.

The move by Barnier is of a piece with the new European markets regulatory framework coming into force from the beginning of next year. Three new EU agencies supervising securities, banking and insurance come into operation in London, Frankfurt and Paris next month.

The EU menu of fines and sanctions varies enormously across the 27 countries. Insider trading, for example, can result in fines of more than €1-million in 12 states, but a maximum of €200 000 in four and in 15 countries the fines are likely to be less than the profits.

Perhaps most sensitively, the proposals will have an impact on criminal law since criminal cases and jail terms are not consistent. —

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