Week after week, we have seen dramatic allegations of malfeasance at UK and US banks. First, we have Libor fixing, then HSBC's "pervasively polluted" culture helping Mexican drug traffickers, and now detailed allegations that Standard Chartered has colluded with the Iranian regime to illegally transfer sums totaling $250bn.

On 5 October 2005, the head of Standard Chartered Americas wrote to the bank's top brass in London about the "very serious or even catastrophic reputational damage" that could be caused by some of the UK institution's transactions involving Iran. He warned that the bank's behaviour could lead to "serious criminal liability" for senior management, including himself.

Nearly seven years later, Standard Chartered stands accused by the New York banking regulator of operating as a "rogue institution" by deliberately altering wire transfers involving Iran to evade American sanctions. What appears to be perhaps even more concerning about this week's bank sleaze charges is that Standard Chartered allegedly perpetrated a "staggering cover-up" by repeatedly providing false information to the regulators. The bank's accounting firm Deloitte is also accused of aiding it by deliberately withholding important information from the authorities.

Standard Chartered denied the allegations saying that it "strongly rejects the position and portrayal of facts" made by the New York State Department of Financial Services, and claiming that "99.9%" of its transactions complied with regulations. Deloitte said that it "had no knowledge of any alleged misconduct by bank employees". We will have to wait and see whether these allegations are proven; at a hearing next week, the bank will have to justify why it should keep its New York banking licence.

What is not new is the apparent contempt – as the New York regulator called it – with which banks appear to treat their government supervisors. It is easy to imagine why (and some senior officials will admit this off the record): the risks and rewards are unbalanced. When banks get things wrong, at the worst they escape with a slap on the wrist and a fine that may seem large but is usually only a fraction of the bank's profits. Meanwhile, lucrative business leads to lucrative bonuses for individual bankers behind the schemes. The end result is that shareholders bear the risks and pay the price, while individual bankers get rewarded for their "swashbuckling".

It is worth personalising this for a moment. The current UK government minister and former HSBC boss, Lord Green, took home £15m in salary and bonuses while presiding over a bank that is accused of providing a conduit for "drug kingpins and rogue nations". He may be a wonderful trade minister but there is a basic issue of accountability that needs to be addressed here. So far, Green has yet to give his money back to hard-pressed shareholders, who may have to pay up to $1bn in fines. Peter Sands, as Standard Chartered's current boss and finance director from 2002 until 2006, should have played an important oversight role over the bank's operations during the period that the Iran scheme was allegedly carried out. As should have Lord Davis, a former UK Labour trade minister who preceded Sands as the bank's CEO.

Last year, the UK financial regulator, the Financial Services Authority published a remarkably revealing review (pdf) of how banks in Britain comply with anti-money laundering protocols. It found that in a third of cases, banks were prepared to take very high money-laundering risks if they felt they wouldn't be found out.

The sheer scale and extent of the malfeasance apparently revealed in these recent scandals suggests that this is also not a case of just a few bad apples within a bank. The New York banking regulator claims that the success of Standard Chartered's Iranian business stems from the "documented willingness of its most senior management to deceive regulators and violate US law". In the case of HSBC, emails have emerged that suggest the bank's management were informed of the anti-money laundering problems at the bank.

Something seems very rotten in the banking industry. Shareholders and governments must do more to fix this problem.

First, and most importantly, senior bank management needs to be held personally liable for serious violations of the law. The threat of losing their fancy houses, lucrative bonuses and reputation in high society may spur executives to treat the law and its enforcers with a little more respect. Compliance and ethical behaviour need to be clearly benchmarked – and any bonuses awarded to senior staff properly clawed back if malfeasance subsequently comes to light. This is also a duty for shareholders, who have seriously lost out following the publications of the allegations about Standard Chartered.

The prospect of a prison cell would certainly focus minds. The crimes alleged are massive, and where proved true, of a breathtaking scale, earning hundreds of million dollars in rewards, while assisting terrorists, tyrants and drug traffickers. The punishment now needs to fit those crimes. Prison and penury would certainly focus minds of potential future banksters.