The question that many of us asked in the wake of the revelations about money laundering at Standard Chartered Bank is why the federal regulators did apparently nothing, and that this had to get revealed by New York’s Department of Financial Services. The credible speculation here is that the feds were working on a deferred prosecution agreement, and were thoroughly uninterested in doing any actual investigation in this space. The Washington Post questions this today.

Regulators are catching flak for not acting sooner to stop banks that helped Iran flout U.S. sanctions. This week, the state of New York said London-based Standard Chartered Bank concealed $250 billion in Iranian transactions, violations that persisted for nearly a decade.

A number of international banks, including Lloyds, Barclays and Credit Suisse engaged in similar behaviors, but it took years before regulators put their foot down. State and federal agencies routinely audit banks to ensure compliance with anti-money- laundering rules, but institutions continue to skirt the law.

Critics say enforcement actions have fallen short of serving as a deterrent, especially since the punishments resulted in fines but no jail time. Policing the world’s banking system, others say, is no small task. And regulators are doing as much as they can in the face of rampant deception.

As a side note, you have to love the WaPo using the “critics say” and “others say” formulation, when their editorial board criticizes Harry Reid for using an anonymous source.

But in this case, allow me to side with the “critics,” giving them a public source. Enforcement actions have clearly been a joke. And so the money laundering continues. And it’s not limited to money laundering: practically all corporate fraud cases share this “slap on the wrist” quality:

The ballooning settlements are for civil charges of fraud against the government, criminal charges often related to the same conduct and, in the case of health care companies, recovery of money for states for Medicaid fraud.

But while the collections are a boon to the government and taxpayers, they are resurrecting questions about the relative lack of charges against executives at the companies that are getting the stiffest penalties.

“A lot of people on the street, they’re wondering how a company can commit serious violations of securities laws and yet no individuals seem to be involved and no individual responsibility was assessed,” Senator Jack Reed, Democrat of Rhode Island and chairman of a subcommittee that oversees securities regulation, said at a recent hearing [...]

“If you are an executive, you know that the chances of getting caught are infinitely small, and the chances of getting caught and prosecuted are even smaller,” said Dennis M. Kelleher, president of Better Markets, which advocates financial regulatory reform.

The Obama Administration is touting the civil penalties they’re reaping from fraudulent companies. But it’s both not stopping the fraud, and also not even commensurate with the profits that the offending corporations take from committing the fraud. That makes the fines part of the cost of doing business. And business is good.

Administration officials, behind a veil of anonymity (bad Harry Reid!), claim that it’s so very hard to finger specific individuals for corporate fraud. That’s just bunk. And this lie has perpetuated an economy that is increasingly based on fraud.