OCC outlines plan for referring regulatory offenses to DOJ

Al Drago/Bloomberg

The Office of the Comptroller of the Currency this week issued a notice announcing it will comply with a recent executive order aimed at curbing overcriminalization in federal regulations.

OCC's guidance, published Friday in the Federal Register, reminds staff to carefully consider criminal referrals and give the financial industry some very clear guidelines for where offenses will meet criminal thresholds. In a release, the agency also described a general policy for how its staff should weigh referrals to the Department of Justice, "subject to appropriate exceptions and to the extent consistent with law." 

The OCC guidance puts emphasis on staff discretion and the actual or potential harm caused by the alleged offense in question when considering criminal regulatory referrals. Staff should consider the financial upside for the alleged offender and whether the person had industry-specific knowledge or licensure, as well as the alleged offender's knowledge of the regulations at issue, or "lack thereof." 

Staff are also instructed to weigh whether the person likely understood their conduct was illegal — adding a subjective awareness test to staff decision-making. The agency frames this as general policy guidance rather than a legally binding standard, but it reflects a broader move to tailor enforcement to intent, impact and context.

The president issued an executive order on May 9 entitled "Fighting Overcriminalization in Federal Regulations," requiring agencies to review their processes for criminal referrals of regulatory offenses. The OCC said that as part of its compliance with the order, it will also produce a report in consultation with the Attorney General Pam Bondi by May 9, 2026, listing all criminal regulatory offenses it can enforce, including their penalty ranges and required mental state standards applicable to each regulatory offense.

Enforcement

TD money-laundering scandal revives allegations of Too Big To Jail

October 18, 2024 6:00 AM

Regulators have historically referred regulatory offenses to the Department of Justice only rarely, and regulators and law enforcement were criticized in some quarters for not pursuing more criminal penalties in the wake of the Global Financial Crisis more than a decade ago.

When Biden-appointed Attorney General Merrick Garland announced a historic $3 billion settlement with TD Bank last year, the Biden-DOJ did not impose any criminal charges against executives despite overseeing a years long money-laundering conspiracy. While prosecutors said they charged more than two dozen individuals, including two bank insiders who accepted bribes, none of the bank's supervisors or executives were named in the October actions.

Experts say the reluctance to charge bank executives individually stems from the complexity of proving personal intent in a diffuse decision-making environment, the legal strategy of focusing on corporate fines and the institutional size that provides a shield of protection.

Decisions by big banks like TD are made through layers of bureaucracy, which fragments accountability and makes it hard to pin criminal charges on any one person. Prosecutors must show that a specific executive not only knew about illegal conduct but intended to commit or allow it — something that can be challenging when responsibilities are dispersed and records don't necessarily include statements of intent. Larger banks also have more resources available to fight or negotiate any criminal compliance obstacles, leading prosecutors to settle for corporate fines and compliance reforms rather than pursue lengthy, high-risk trials.