3

This is something that got me wonder a while ago, where the US, or the EU for example issue a huge fine to a company or a bank (Wells Fargo just got fined 1B$!), where is that money going? I mean will the end user who has been wronged, see any of the money the government will get?

7

In the U.S, it depends on the nature of the fraud. In general, civic penalties go to the victims or the U.S. Treasury but other government agencies or states may get part of them as well.

When Volkswagen was fined $14.7 billion for emissions violations, up to $10 billion was designated for owners of affected cars, $2.7 billion went toward environmental cleanup and $2 billion to promote zero-emission vehicles.

In securities cases, the SEC generally returns ill gotten gains to victims unless the gains are too small or the victims cannot be identified. Then, the fines revert to the U.S. Treasury.

For example, the 150 million penalty against Bank of America for violations during the Merrill Lynch acquisition was distributed to BoA shareholders.

In a naked shorting case, the fines against Goldman Sachs went to the regulatory arm of the NYSE because specific victims could not be identified.

When the 6 biggest banks were fined 100+ billion dollars for selling shoddy mortgages, the proceeds went to consumers, the states the Treasury, and the Justice Department.

So it depends...

4

For the specific case of the $1B fine for Wells Fargo, that was actually levied by two different agencies.

So $500M goes to the Consumer Financial Protection Bureau (CFPB), which will go into their civil penalties fund. That fund is used to pay consumers who have been wronged in other cases (though it doesn't look like any will be going to anyone specifically impacted by Wells Fargo's actions).

The other $500M will go to the Comptroller of the Currency, which will go directly into the US Treasury and general fund.

(I heard this on "Marketplace" last night, here's an article on the subject)

0

This is very much upto the internal workings of the regulatory body/government issuing the fine. Some fines will be coupled with requirements to pay back money to those wronged and some will not...

So where does the fine money go?

There are three possibilities

  • Some government agencies are self funding ( this is a popular modal in the UK now) so any fines they issue will be used to fund that agency (not sure how applicable this is to financial regulators)
  • Other fines will go back into the relevant governments' budget how this is then managed is down to the government of the day and their priorities and spending policies this is what happens to most FCA fines in the UK
  • Some of the money raised by the FCA has been given to charity although these charities were not of particular relevance to the fines

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.