In order to strengthen efforts to combat financial crime, the Obama administration announced Tuesday that is has established an interagency Financial Fraud Enforcement Task Force.
The new task force will be headed by the Justice Department, while the Treasury Department, the Housing and Urban Development Department and the Securities and Exchange Commission will serve on the steering committee.
The goal of the new task force will be to work with state and local partners to investigate and prosecute significant financial crimes, punish those who perpetrate financial crimes, address discrimination in the lending and financial markets and recover proceeds for victims.
It is replacing the Corporate Fraud Task Force established in 2002 and will build upon efforts already underway to combat mortgage, securities and corporate fraud by increasing coordination and fully utilizing the resources and expertise of the government's law enforcement and regulatory apparatus.
Attorney General Eric Holder will convene the first meeting of the task force in the next 30 days.
"This task force's mission is not just to hold accountable those who helped bring about the last financial meltdown, but to prevent another meltdown from happening," Holder said.
He added, "We will be relentless in our investigation of corporate and financial wrongdoing, and will not hesitate to bring charges, where appropriate, for criminal misconduct on the part of businesses and business executives."
Holder said that he hoped the formation of the task force would send a strong message of deterrence in areas that have proved at the core of earlier financial crimes cases, including mortgage fraud, securities fraud, discrimination and potential fraud in projects funded by the $787 billion economic recovery and stimulus package.
"We will protect borrowers and ensure the integrity of the financial services industry by combating mortgage fraud head-on. We will protect investors and our capital markets by vigorously attacking securities fraud," he said. "We will ensure that recipients of federal financial rescue funds do not obtain them through fraud, or use them for improper purposes."
He added, "We will make sure that federal stimulus funds are well-spent by vigilantly protecting the integrity of federal procurement and grant processes.
Treasury Secretary Timothy Geithner, speaking at a press conference with Holder, said gaps in regulation had contributed to the economic recession from which the country is only now recovering.
"Basic regulations in our financial system that were designed to provide those protections instead allowed many financial institutions to operate completely outside of them with little supervision or oversight," Geithner said. "To address these failures we first need to enact comprehensive financial reform that establishes stronger standards, enforces those standards evenly and creates a more stable, safer financial system.
Geithner said that financial reform measures under consideration before Congress were steps in the right direction.
But, he added, regulators also need to be more proactive and aggressive in their enforcement, noting that regulators only realized the full extent of problems in subprime mortgages after it was already too late.
"It's not enough to prosecute fraud only after it's become widespread. We can't wait for problems to peak before we respond," Geithner said. "President Obama is committed to changing that and bringing a more aggressive, preemptive and proactive approach … to stop trends in financial fraud as early as possible."
He added, "As part of this, we will work to increase transparency in our financial system, making it more difficult for criminals to access, manipulate or hide illegal assets. And we will enhance coordination to better analyze and investigate the intelligence we get from financial institutions regarding suspicious activity."
Housing and Urban Development Secretary Shaun Donovan said that, because no one agency can stop financial fraud, the task force will "build upon many of the inter-agency collaborations already underway to protect consumers and restore confidence."
Finally, SEC Chairman Mary Schapiro said in a written statement that, though there are many financial frauds that are "complicated puzzles that require painstaking efforts to piece together," the task force would allow the government to coordinate its efforts and allow it to "be better able to identify the pieces, assemble the puzzle and put an end to the fraud."
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