Federal officials appeared quite pleased with themselves earlier this week when they announced their $1.9 billion settlement with HSBC. HSBC, the world’s third largest bank, has been accused of laundering money for Colombian and Mexican drug cartels and clients with ties to terrorists.
In July, a Senate Permanent Subcommittee on Investigations released a report about its probe into HSBC and its shady financial dealings. The subcommittee found that HSBC and its affiliates in the United States “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls.”
Democratic Senator Carl Levin of Michigan, chairman of the subcommittee, said:
“In an age of international terrorism, drug violence in our streets and on our borders, and organized crime, stopping illicit money flows that support those atrocities is a national security imperative. HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”
Money Laundering For Drug Cartels: The Dirt Behind HSBC’s Record $2 Billion Settlement
Despite the findings of investigations into HSBC’s money laundering activities, federal and state authorities decided not to indict the London-based bank. The New York Times called it “a dark day for the rule of law.” The Times said that authorities also chose not to charge “any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.”
From the New York Times Editorial on the HSBC settlement (December11, 2012):
Clearly, the government has bought into the notion that too big to fail is too big to jail. When prosecutors choose not to prosecute to the full extent of the law in a case as egregious as this, the law itself is diminished. The deterrence that comes from the threat of criminal prosecution is weakened, if not lost.
Jimmy Gurulé, a professor of law at Notre Dame and former assistant attorney general, said the deal “makes a mockery of the criminal justice system.”
Glenn Greenwald called HSBC “the new poster child for US two-tiered justice system.” To support his claim, Greenwald wrote the following in a Guardian article on Wednesday:
The US is the world’s largest prison state, imprisoning more of its citizens than any nation on earth, both in absolute numbers and proportionally. It imprisons people for longer periods of time, more mercilessly, and for more trivial transgressions than any nation in the west. This sprawling penal state has been constructed over decades, by both political parties, and it punishes the poor and racial minorities at overwhelmingly disproportionate rates.
But not everyone is subjected to that system of penal harshness. It all changes radically when the nation’s most powerful actors are caught breaking the law. With few exceptions, they are gifted not merely with leniency, but full-scale immunity from criminal punishment. Thus have the most egregious crimes of the last decade been fully shielded from prosecution when committed by those with the greatest political and economic power: the construction of a worldwide torture regime, spying on Americans’ communications without the warrants required by criminal law by government agencies and the telecom industry, an aggressive war launched on false pretenses, and massive, systemic financial fraud in the banking and credit industry that triggered the 2008 financial crisis.
Rolling Stone journalist Matt Taibbi weighed in on the subject of the HSBC settlement being an example of a two-tiered justice system too. He said the bank deal “proves that the drug war is a joke.”
Taibbi wrote:
If you’ve ever been arrested on a drug charge, if you’ve ever spent even a day in jail for having a stem of marijuana in your pocket or “drug paraphernalia” in your gym bag, Assistant Attorney General and longtime Bill Clinton pal Lanny Breuer has a message for you: Bite me.
Breuer this week signed off on a settlement deal with the British banking giant HSBC that is the ultimate insult to every ordinary person who’s ever had his life altered by a narcotics charge. Despite the fact that HSBC admitted to laundering billions of dollars for Colombian and Mexican drug cartels (among others) and violating a host of important banking laws (from the Bank Secrecy Act to the Trading With the Enemy Act), Breuer and his Justice Department elected not to pursue criminal prosecutions of the bank, opting instead for a “record” financial settlement of $1.9 billion, which as one analyst noted is about five weeks of income for the bank.
Taibbi said Breuer admitted there were times when drug dealers actually came to HSBC’s Mexican branches to deposit “hundreds of thousands of dollars in cash…using boxes designed to fit the precise dimensions of the teller windows.”
Evidently, the Justice Department rejected the idea of prosecuting HSBC because it might have “a damaging impact on the bank’s viability, and thus on jobs and the American economy.” The New York Times said that federal and state authorities feared that “criminal prosecution would topple the bank and, in the process, endanger the financial system.”
Taibbi says that kind of reasoning “is beyond flawed.” He continued:
“When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC’s Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn’t protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most ‘reputable’ banks may in fact be captured institutions whose senior executives are in the employ of (this can’t be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department’s response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way.”
British Bank HSBC Makes $2 Billion Settlement (PBS)
GOP Senator Charles Grassley of Iowa sent a letter to Attorney General Eric Holder on Thursday. In it, he said that it was “inexcusable” for the DOJ “not to prosecute criminal behavior by the British banking giant HSBC.” Grassley continued, “What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists.” He added, “By allowing these individuals to walk away without any real punishment, the department is declaring that crime actually does pay.”
Assistant Attorney General Lanny Breuer defended the settlement during a news conference in New York on Tuesday. Breuer said, “HSBC is being held accountable for stunning failures of oversight.”
Failures of oversight????? I’d say that’s an understatement! What do you think?
SOURCES
Outrageous HSBC Settlement Proves the Drug War is a Joke (Rolling Stone)
Taibbi, Spitzer Fume Over HSBC Settlement (Rolling Stone)
HSBC to Pay Record Fine to Settle Money-Laundering Charges (New York Times)
Too Big to Indict (New York Times)
HSBC: Too big to jail? (CNN)
Final Thought On HSBC Settlement: How Much Bad Behavior Will We Tolerate? (Forbes)
Two big British banks reach controversial settlements (Economist)
Grassley blasts Holder for HSBC settlement (KETV)
HSBC Exposed U.S. Financial System to Money Laundering, Drug, Terrorist Financing Risks (Senate Subcommittee Report)