“WHY aren’t crooked bankers in prison?” the Daily Mail asked in a recent front-page headline following the massive fines for banks over traders cheating foreign exchange (Forex) markets. 

It’s a simple question — why aren’t bankers jailed? How can banks be fined £2 billion for fiddling Forex without anyone having their collar felt?

There is a simple answer. No-one is trying to put them in prison for this crime without punishment. To understand how it doesn’t work, look to the US, where it sometimes does. There financial criminals are sometimes sent to prison — US prosecutors usually get the lower-downs and let the top dogs off. They have been harder on fringe institutions than the centre of Wall Street. But they are still a long way ahead of the UK for prosecuting financial crooks because they have a 95 per cent amnesty for the robber barons instead of the 99.99 per cent one we operate.

 The US shows just how weak Britain’s approach is. A recent New Yorker magazine article describes prosecutors taking on a hedge fund called SAC Capital last year. Hedge funds aren’t as central to the system as banks but SAC Capital wasn’t small fry. It is run by Steven A Cohen, who has an estimated fortune of $11bn. 

SAC Capital was busted for insider trading, with one manager bribing a drug company’s expert for inside information on trial performance of an anti-Alzheimer’s drug. The SAC Capital manager found the drug wasn’t working and SAC Capital were able to reverse their position, converting a huge investment in the drug company into a massive bet against it on the markets before the results were announced. 

SAC Capital made a $275 million profit on the dodgy deal. This was not unlike the banks fiddling Forex trading, in that it relied on secret agreements to rig supposedly free markets, cheating other investors. In passing, also note the financial system’s approach to one of the great medical problems of our age, Alzheimer’s. It is seen as a sleazy way to make money.

This is where you realise you aren’t in London any more. Hearing rumours of insider trading, the FBI started investigating SAC Capital. That’s the first difference. If you want to prosecute criminals, you need a proper criminal investigator. 

The FBI put special agent BJ Kang on the case, which involved wiretaps and searches. As the New Yorker makes clear: “The tactics echoed the approach the FBI had used to dismantle the New York mob. The plan was to arrest low-level soldiers, threaten them with lengthy jail terms, and then flip them, gathering information that could lead to arrests farther up the criminal hierarchy.”

The investigation wasn’t totally successful. One trader went to prison for nine years but his boss, Steven Cohen, escaped prosecution. His firm did have to pay a $1.2bn fine, SAC also had to close down much of their business in a legal agreement. Agent Kang was also involved in other high-profile prosecutions, like the imprisonment of Bernie Madoff. 

According to another imprisoned hedge fund manager caught by agent Kang, the G-Man arrested him and said: “Take a good look at your son. You’re not going to see him for a long time. Your wife doesn’t seem so upset. Because she’s going to spend all your money.”

Our lead agency in bank crime is the Financial Conduct Authority. It is a regulator, so it won’t even try to put anyone in prison. That’s not its job. But even its regulatory approach is completely ineffective. We know the big fines don’t work because the Forex cheating took place after the Libor fines. Fines were no deterrent. As we have already bailed out and part–nationalised the banks, we are in effect fining ourselves. 

If we wanted a policy, rather than prosecutorial solution to the banks’ behaviour, there is a simple one to hand. High street or “retail” banks keep cheating their customers with things like PPI. Investment banks are obsessed with cheating clients with obscure trades instead of investing in British industry. 

If we wanted to change that the government could set up a non-cheaty high street bank and a fraud-free business friendly investment bank. They’ve done this before — in 1945 the Labour government set up the Industrial and Commercial Finance Corporation because mainstream banks refused to invest in industry in the preceding great depression. 

In 1968 the Labour government set up Girobank in reaction to high street banks’ refusal to serve working-class customers. Both ICFC and Girobank were more successful than their banking competitors. Recreating such state banks would allow us to stop propping up the crime-ridden institutions like RBS.

If we want a prosecutorial, rather than policy, solution to banks being in effect criminal enterprises, we need to look beyond the FCA. We need criminal investigators. In theory they are found at the Serious Fraud Office, who are looking at both Libor and Forex crimes. 

But the Serious Fraud Office (SFO) isn’t really serious. It is no FBI. The SFO has been deliberately made weak in order not to prosecute corruption. City crime has been hived off to the SFO so it can fail, with the last Labour government telling it to call off its investigation into BAE-Saudi arms trade corruption. 

With these kind of instructions from the top, the SFO completely lacks any real will to prosecute. It is underfunded and under-powered. It is there to fail, and has promptly staged a series of embarrassing failures.

The next investigators are found in the City of London police. But they are far too close to the City to actually send any big bankers to the cells. They are much keener on protecting the City from its critics than looking at its crimes. 

When I went to the 2009 “G-20 Meltdown” protest at the Bank of England, it was perfectly obvious how the City of London Police, with the backing from the Metropolitan police, reacted to the financial crisis. They defended the City in the most medieval form. Their “kettles” and clearances were the actions of footsoldiers defending the citadel against the barbarians at the gate. The police killed one man, Ian Tomlinson, in the process. 

So that is why there are no bankers in jail. The authorities would rather attack the people who protest about the banks with batons than actually investigate the bankers.