Sigrún Davíðsdóttir's Icelog

Why are bankers investigated in Iceland and not so much elsewhere?

with 18 comments

Today, I was interviewed both on BBC radio 5 live and BBC radio 2 regarding bankers being sentenced to prison in Iceland. On both stations I was asked why bankers are being prosecuted in Iceland. I would rather turn that question around? Why are bankers not being investigated – and eventually charged, if there is a case against them – in other countries, for example in Britain?

Lets imagine that a huge big building crashes in the centre of London. Luckily, no one gets killed but damages run to millions, the whole area is disrupted, causing further financial damages and troubles for people and businesses for weeks and months and even years. How would this incident be treated? Would the authorities just say that this was tough luck and let it be? No, I very much doubt it. This incident would be investigated to the core and no one would rest until the cause was found. Also to make sure other buildings could not just suddenly and unexpectedly collapse. If it was then found there was willful negligence, corners cut to make more money and there would be emails and other evidence to show it those to blame would be prosecuted and their case brought to court.

The financial collapse, not just in Iceland but here in the UK and elsewhere was like a huge big building – indeed many of them – crashing. No, no one died but the financial damage has been great, shocks and after-shocks, lives and societies disrupted and upset.

Following the collapse of the three largest banks in Iceland in October 2008, the parliament decided on two things: one, to set up a special investigative commission, the SIC commission, that would clarify all aspects of the collapse, causes and failures in the running up to the collapse. This report, 2600 pages in 9 volumes (with some digital appendixes) came out in April 2012.

The chapters on the banks tell well documented stories of their lending practices, how some of the largest shareholders used the banks like their private banks, loans against no or weak collaterals, lending beyond legal limits and so on. A true thriller beating all financial fiction.

The other measure was to set up an office of a special prosecutor. No one applied. Finally, a sherif from Akranes, a small town on the bay opposite Reykjavík, was talked into taking on the job, Ólafur Þór Hauksson. He had no experience and no resources. Eva Joly was brought to Iceland to tell Icelanders and the authorities that staff and resources would be needed, this would take a long time and be costly. Eventually, three other prosecutors were hired and when the Office was at its biggest there were over 100 people working there. Now it’s being reduced and the cuts of the new centre-right government have also been sensed there.

Already in the SIC report there were stories that raised questions about possible criminal activities. The al Thani loan saga was one of them. Further, the OSP has now charged the top managers in all the three banks. The al Thani case was the first big case to reach sentencing. The three Kaupthing managers now sentenced are also charged in another large market manipulation case, as are managers from Landsbanki and Glitnir (on both cases see here).

Ólafur Ólafsson, Kaupthing’s second largest shareholder, was also charged in the al Thani case and now sentenced. Other earlier high-fliers charged earlier are Jón Ásgeir Jóhannesson, Glitnir’s largest shareholder and also Hannes Smárason, once a close business partner of Jóhannesson and then recently called in by Kári Stefánsson CEO of the genome company deCode, where Smárason was once a CFO, to run a company in the US. After the charges Smárason stepped down from the post.

But what about the UK? The Serious Fraud Office investigated Kaupthing but dropped the investigation after serious mistakes were done. Libor rigging was at first only investigated as if it was a natural disaster so no person was culpable. A bank rigged Libor, a bank got fined – and yet a bank is made up of people who think, plan and act.

The SFO is now investigating Libor rigging as possibly criminal activities and some people have been charged. Who are these people? Traders and others who actually carried out the alleged criminal activities. Are we to believe that they took up this pastime of fixing libor just for the fun of it? However it could happen it means that those in charge of these banks did a rather poor job of overseeing them. Shouldn’t that failure be investigated?

Every day seems to bring news of banks being fined – there are record fines, ever bigger fines, ever more serious deeds and banks are still more willing to buy sovereign bonds or some financial product with the cheap money they get from governments rather than dirtying their hands on servicing companies. There is libor rigging, money laundering, selling swaps that customers lose money on, currency rate rigging and alleged driving companies into bankruptcy rather than helping them to restructure – all of these “oversights” are treated as if they were carried out by machines and systems, not by reasoning and calculating people of flesh and blood. And for some reason shareholders patiently see their dividend capped by fines and yet say nothing.

When asked about the ongoing investigations in Iceland by non-Icelandic journalist they often seem to assume that there is something special about bankers being investigated; that this is somehow because something is different in Iceland, perhaps the law, perhaps that smallness. No, there is nothing special about Iceland in this respect. Deeds were done, they looked suspicious, there are laws against which these deeds can be tested and then a prosecutor brings charges if there are enough reasons to assume something criminal could have been going on. This is normal if someone robs a car or causes something as disastrous as a house collapse. When banks and banking systems collapsed it suddenly seemed something else had gone on. The strange thing is not why bankers are being prosecuted in Iceland – but why this is not happening elsewhere to the same degree.

PS Anrigaut, an Icelog reader has pointed out to me that Max Keiser has copied and pasted this log on his website but without attributing it to Icelog. I asked him (via Twitter and in a comment on his website) to add a link to the Icelog article. My tweet has now been added to his website.

Follow me on Twitter for running updates.

Written by Sigrún Davídsdóttir

December 12th, 2013 at 11:33 pm

Posted in Iceland

18 Responses to 'Why are bankers investigated in Iceland and not so much elsewhere?'

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  1. Well said Sigrun and thanks once again for your persistence in sticking with this. Your turned-around question – which many of us have long been asking – merits a serious answer. But not much hope of that I’m afraid – too many vested interests (which I guess you well know is the real answer).

    The (up-dated) BBC report on the al-Thani case gives some fascinating details on the round-tripping of the funds to allow the share deal (shell companies, BVI, Cyprus, …).


    13 Dec 13 at 7:33 am

  2. Sorry, I meant to add the link to the BBC article:


    13 Dec 13 at 7:34 am

  3. We are full of admiration fro the courageous Icelandic Prosecutor.

    The Icelandic people should be so proud of the example they are setting for the world about how Financial Terrorism and abuse should be tackled.

    Investigation, Indictment and Punishment regardless of how powerful these reckless, greedy and selfish people think they are.

    Nobody should be too big to jail.

    Iceland has done more to set a good example and punish the guilty than the whole of the European Union put together, has done!

    All those who have protected the crimes of the bank by refusing to investigate let alone punish the guilty, are guilty of enabling crime and should also be punished.

    Iceland and your extraordinary Prosecutor, we congratulate you and thank you.

    Alexander Edwards

    13 Dec 13 at 11:09 am

  4. […] Why are bankers investigated in Iceland and not so much elsewhere? – Why have so few bankers gone to jail for their part in the crisis? […]

  5. At last action against the banksters. Thank you Iceland for taking this stand. Now come on the rest of Europe, follow the example set. Banksters range from grossly incompetent to out and out crooks, but at all levels of criminality the result should be the same. a custodial sentence for all the crimes they have committed. A resignation and the big bonus pay off is not the solution.
    We now hope that a similar fate awaits the executives of Landsbanki Luxembourg for all of their alleged crimes.
    Of note is that the CEO of the Kaupthing Luxembourg branch has also been found guilty.
    This is interesting as according to the administrator of Landsbanki Luxembourg, “there is no problem in Luxembourg”. Mme Hamilius, there is a very real major problem in Luxembourg, as you are perfectly aware. This cancer exists throughout the entire system including the financial regulator, the central bank, the government and the judiciary. The reputation of Luxembourg as a centre of financial excellence is now very much on the line for failing to get its house in order and we very much hope that the excellent example set by Iceland will be followed.

    Michael Equity

    13 Dec 13 at 3:19 pm

  6. Why is it that Iceland has taken action and the UK authorities have not? We know that in the UK the Serious Fraud Office has a catastrophic record, but it seems clear that the political will simply does not exist to make these prosecutions. The UK banks and the 4 big accounting firms have effectively corrupted the politicians, regulators, and civil service. They have so placed their partners and former partners into the system, and their level of lobbying, secondments, and work that they do for these people is so great that they have undue influence. It seems to me that, as a result, the Chancellor of the Exchequer and the UK Prime Minister as well as the heads of the UK regulatory bodies and the civil servants regularly make the wrong decisions.
    We will continue to have scandals involving the UK banks until such time as the senior politicians and senior civil servants clear out from the system those people in the banks and major accounting firms who have the wrong legal and moral attitudes.
    The Chancellor, supported by the Prime Minster, has hung a large sign over the City of London to say that we are open to business for crooks and those with low morals. Iceland has hung out a sign to say the opposite. By the actions of the Icelanders and the inactions of the UK, the undesirables will avoid Iceland and chose London.

    Tony Shearer

    13 Dec 13 at 4:15 pm

  7. Tony,

    Despairing – but how true.


    13 Dec 13 at 4:30 pm

  8. Tony, I totally agree with you, but wait the government has taken action by removing the Knighthood from (Sir) Fred Goodwin. Surely this is enough of a deterrent to keep corrupt bankers out of the City of London ? !!

    Sadly it seems that that in the UK they prosecute the under managers and ignore the big fish. Everyone is in somebody’s pocket and the City must go on regardless. The SFO is underfunded, understaffed and part of the system.

    We have been fighting corruption for 5 years in our group and as we are all elderly pensioners just hope that we live long enough to win the day. The latest news from Iceland is a very big result for us as it shows that the corruption came from the very top. We look forward to the Landsbanki case and hope that the right people are prosecuted.

    Nina Foster

    13 Dec 13 at 4:59 pm

  9. It is all coming out of the woodwork. See the site report.

    Nina Foster

    14 Dec 13 at 8:48 am

  10. The E.U. is worthless if it is choosing politicians to place in positions of influence.
    Ambitious politicians who have failed in their own countries where abuse of the consumer and clients of banks have been robbed and sold lies schemes which have poisoned the economy, cannot serve the E.U.

    The judiciary and laws of each EU country should not be favouring the bankers who abuse and are protected by armies of lawyers as greedy as the banksters.

    The E.U. is allowing Luxembourg to sell toxic financial products and to poison European consumers and we seem to have 2 main financial septic tanks. London and Luxembourg.

    What is the E.U. for if it allows financial terrorism in the place of consumer protection?
    The E.U. needs the courage of ICELAND and a justice system that punishes banksters instead of giving them bonuses and promotions for robbery and the destruction of families and businesses.

    Applause for Iceland’s Attorney General and the people of Iceland who have set an example to the world.

    Alexander Edwards

    14 Dec 13 at 3:57 pm

  11. When will it all end, over the past months we have heard of so much illness and even demise which has been brought about by all the worry, misrepresentation and devious “doings” of Landsbanki. We keep hearing that things are nearing our cause but how long must we wait!! The poor people involved are now beginning to feel their demise will be reached before they get satisfaction. Lets hope the powers that be make it work for us and help all those affected to lead a more peaceful life.

    Jean Foster

    16 Dec 13 at 8:09 am

  12. Keep up the good work Sigrun. Sometimes the little guy wins but he has to fight harder, smarter and longer.
    The rich protect the rich regardless of country, political system or religion. For too long those who run our financial systems have believed they are above the laws that govern the rest of us.
    They wreck the lives of millions yet award themselves six and seven figure bonuses. I doubt if any of them face having their homes repossessed this winter.
    I wish Karma was more real than Santa this Christmas.

    Mr and mrsFfegan

    16 Dec 13 at 9:06 am

  13. “The strange thing is not why bankers are being prosecuted in Iceland – but why this is not happening elsewhere to the same degree.”

    An excellent question demonstrating excellent analysis, but no solution. It leads us to the fundamental parochial question – what collective action can we take to obtain justice against Yvette Hamilius and those she supports? Perhaps we should start by identifying potential powerful supporters; and methods to bring the matter to the attenion of the European Court.


    16 Dec 13 at 10:09 am

  14. Sigrun

    A very good article – perceptive as ever.In the UK I believe the only thing that has happened was Fred Goodwin lost his knighthood ! However I think the UK problem was greed and negligence rather than straight dishonesty of which Landsbanki Luxembourg were clearly guilty of – I have evidence of unauthorised withdrawal of funds ( commonly known as theft ). Why have the Luxembourgeois not even investigated this and why does Hamilius appear to protect the guilty. Luxembourg should get its house in order.

    Adam Pollock

    16 Dec 13 at 11:23 am

  15. Sigrun
    A very interesting and detailed article. Glad to see someone has the courage to stand up to these criminals who have taken from the poor to give to the rich. Investments which were supposed to be protected under an insurance wrapper, have been illegally withdrawn. Portfolios have been badly mismanaged and promises broken. These crimes against innocent pensioners cannot be ignored

    Linda Proctor

    16 Dec 13 at 3:18 pm

  16. “no one died” I am not sure; it looks like bank frauds caused lots of death.
    Fiddling the accounts of Greece prior to entry in the Euro has caused many death.
    (32000 medical personnel made redundant this year alone in Greece, accessibility to drugs etc)
    I wonder how many people with equity release were stressed to such an extent their heart didn’t resist.
    Financial fraud do cause deaths and rarely a banker has jumped (one to my knowledge) It is mostly the poorest which suffer the most.


    18 Dec 13 at 3:21 pm

  17. I commend your observations expressed in your blog. Landsbanki Luxembourg SA were in “breach of contrac” when they went into bankruptsy by the appointment of the Liquidator Hamiliusto to steal all assets she could lay her hands on. All the investment porfolios were misssmanaged and obtained by theft and large charges were applied. The insurance policies for these loans were cancelled; unauthorised therefore illegal.
    Something should be done to expose this traversty of Banking by the Authorities of Luxembourg and the EU.
    Congratulations on your concise appraisla.

    Jon Howard

    19 Dec 13 at 5:51 pm

  18. Well, in the US we don’t even take away knighthoods. We just let the same problem children go on running the banks. When they aren’t taking a little time to do “public service” by running the agencies that regulate the banks.

    Knute Rife

    3 Jan 14 at 2:26 am

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