Submitted by Elaine Magliaro, Guest Blogger
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)
Elaine,
Excellent….. And if we had a president and a DOJ with cajones we might have a different result…. We certainly know Romney would not have any incentive to o the next right thing…..
‘…….destabilize the global financial system….’
——————
well it looks pretty destabilized to me….
it’s time to dump the monopoly money, there is no better time to build something new as when the old is so corrupt and broken that it no longer serves its purpose….
are you an ex-pat Bukko? [I’m surprised they haven’t put up a fence along the border to keep the exodus at bay….]
Too Big to Jail: Our Banking System’s Latest Disgrace
Neil Barofsky
December 12, 2012
http://www.tnr.com/blog/plank/111041/too-big-jail-our-banking-systems-latest-disgrace#
Excerpt:
You can be forgiven if you watched the Department of Justice’s announcement yesterday of a $1.92 billion settlement with HSBC with a sense of disappointment–and déjà vu. The event checked all the boxes in a theatrical routine that has become all too familiar.
Descriptions of breathtaking misconduct involving the facilitation of massive drug trafficking and transactions with rogue terror-sponsoring nations? Check.
Broad boasts about the “historic” nature of the settlement that will certainly end the type of criminal misconduct alleged? Check.
Mea culpas from the offending institution with promises that it has really learned its lesson this time and will never ever engage in dastardly conduct again? Yep, that too.
Nothing, however, was quite as it appeared. Sure, HSBC paid a record fine, but there was something vitally important missing from yesterday’s press conference: actual criminal charges for obvious criminal conduct.
Some perspective: HSBC sent more than $800 million in bulk cash from Mexico to the United States, a good chunk of which apparently represented proceeds from some of the most notorious Colombian drug cartels. As someone who tried the first narcotics money laundering case involving extradition from Colombia, let me assure you that this is a lot of money, the discovery of which usually generates vigorous prosecutions and lengthy prison sentences. And it wasn’t HSBC’s only dirty business: There were also hundreds of millions of more dollars of illegally disguised transactions with rogue nations such as Iran and Sudan.
Why no criminal charges? Why instead only some remedial measures and a “historical” fine that can be measured in weeks — not years — of earnings? It certainly wasn’t for lack of evidence. No, instead the government determined that HSBC is not only too big to fail, but also too big to jail. As the New York Times first reported, even though there were strong voices within DOJ pushing for criminal charges, the big banks’ best friends within the government (the Treasury Department, of course, and other unnamed regulators) were too fearful that an indictment could destabilize the global financial system. Yes, it’s 2008 all over again. In the name of systemic stability, a megabank again escapes accountability for its actions, rescued by compliant officials.
In some aspects, DOJ’s surrender is understandable. Notwithstanding regulatory reform efforts in the U.S. and the UK, the largest banks are in many ways even more systemically dangerous today than when we bailed them out in 2008. This indirect acknowledgment that we have failed to fix the too-big-to-fail problem has potentially dire consequences.
One of the reasons why we have a criminal justice system, of course, is to deter criminal behavior. If you know that you will be punished for putting your hand in the cash register at your local supermarket (or illegally stripping out information from a monetary transaction that identifies the source nation as Iran), you are less likely to do so. But if the government offered a blanket waiver from criminal accountability for a certain group — let’s say all left-handed people over six feet tall or a handful of banks deemed so large and so significant that their indictment could destroy the global financial system — we would expect that those exempted would no longer be deterred from committing criminal acts. And although lefty giants may otherwise lack a predisposition for boosting cash, in recent years the largest banks have demonstrated an unbridled zeal for pushing the boundaries of the law as part of their relentless pursuit of profits. DOJ’s actions with regards to HSBC are beyond unfair: They are downright terrifying for weakening the general deterrence for megabanks, both foreign and domestic, which could rationally interpret yesterday’s actions as a license to steal.
Things like this, and the failure to prosecute anyone from the realPresident Cheney Administration for war crimes, is why a country-leaving liberal like me criticizes the Obama Admin. from the Left.
There’s a countervailing view of the money-laundering for “terrorist regimes” such as Iran that was expressed by blogger Juan Cole at Informed Comment, though. His point is that the United States is seeking to throw its financial weight around by demanding that some governments be shunned by the world money-exchanging system. It brands them as rogues and says that any bank which accepts their money is a dirty launderer. That’s all that HSBC was guilty of in that regard, Cole opines — not excluding who the U.S. demanded.
This was the equivalent of a $25 parking ticket.
I fail to be surprised anymore . . .
that fine is not even 1/2 of 1/4’s profits….
Outrageous HSBC Settlement Proves the Drug War is a Joke
By Matt taibbi
POSTED: December 13
http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213
Excerpt:
This bears repeating: in order to more efficiently move as much illegal money as possible into the “legitimate” banking institution HSBC, drug dealers specifically designed boxes to fit through the bank’s teller windows. Tony Montana’s henchmen marching dufflebags of cash into the fictional “American City Bank” in Miami was actually more subtle than what the cartels were doing when they washed their cash through one of Britain’s most storied financial institutions.
Scarface Push it to the limit Scene HD
we must all thank the DOJ for passing that ungainly bag of steaming offal onto the public…..the nameless, faceless, powerless (thank G*D!!!!), little people….
http://www.youtube.com/watch?v=r-7eGYuCaU4
[youtube http://www.youtube.com/watch?v=r-7eGYuCaU4&w=420&h=315%5D
It’s Animal Farm. In Animal Farm, all animals are equal. But some animals are more equal than others.
A two-tiered system of law with one system for the elite and another for us mere proles is just a descent into the United States of Animal Farm.
The small and the weak will be crushed. The elite will be coddled, or when absolutely necessary, subjected to sham punishment for the sake of appearances.
If there is no equality under the law, there is no law but power.
Great job Elaine. You beat me to this one!
If the DOJ was really worried about jobs and the economy, why didn’t they just waive any fines? I would have made it a 1.9 Trillion dollar fine and they could use that money to waive my mortgage with HSBC! I do believe that Mr. Breuer should be held accountable for dereliction of duty if he thinks pandering to terrorists is a mere oversight!
Senator Grassley is right! What the DOJ has done is inexcusable on so many levels. This is another example of the old joke: if you are going to steal steal big! Eric Holder is either scared to go up against the big boys or… I am sick and tire of the bankers of the world getting off Scott free. Put one or two them in jail and the culture would change real quick.
We put people in jail for soooo much less but these guys get awards. We also have war criminals on federal pensions because Obama is too scared to prosecute and now he is proceeding to confirm their previous bad behavior. We are not the land of the free and the home of the brave we are the land of the weak and home of the fooled.
When law becomes arbitrary, there is no law. “Dark day for the role of law” started in 2008. Eric Holder and President Obama should be tarred and featherd for this. And what about Don Siegelman? As a liberal, I am in mourning for my country.
Yea, bettykath, why no NDAA charges and supporting the enemy charges? Wikileaks has certainly never laundered drug money or money from terrorist organizations..
Why no blockaid, no Congressmen calling for the executives at HSBC to be summarily shot?
Why no Fox ‘News’ pundits calling for them to be “taken out” or “assassinated”?
Isnt this the definition of ‘high tech terrorism’?
Selective enforcement in all areas of the law.
We are now a nation of men, not laws.
The top executives either knew or should have known what was going on and they should be going to prison. Interacting with and supporting terrorists is now a detain indefinitely without charges activity.
What makes anyone think they have stopped laundering money? Max Keiser claims that at one point during the economic collapse in 2008, drug money was the only monetary liquidity in the whole system.
Wells Fargo was another bank caught laundering billions.
This may still be the case. We do not know because ‘mark to market’ accounting has been turned into fraudulent accounting in the entire banking system….
Ian Fraser: HSBC’s $1.9 Billion Settlement Sets (Another) Dangerous Precedent
12/15/12
http://www.nakedcapitalism.com/2012/12/ian-fraser-hsbcs-1-9-billion-settlement-sets-another-dangerous-precedent.html
Excerpt:
Yves here. One of the things that has too often gone missing in the many discussions of why massive scale money launderer HSBC was not prosecuted is the basis of the “doing that would be destabilizing” excuse. When a company is indicted (mind you, indicted, not convicted), pretty much all Federal and many (most?) state agencies are required to stop doing business with it, immediately. The effect of the loss of so much business, particularly for a large financial firm, is seen as a death knell.
Of course, that’s the point. The threat of indictment of the company provides tremendous leverage to go after individuals. The Wall Street Journal’s editorial page went on a rampage against Eliot Spitzer when he used that cudgel to force the resignation of CEO Hank Greenberg. Now of course there is a different way to use this power. A prosecutor could just as well inform a board that it is ready to indict the company unless it secures the full cooperation of executives in order to secure prosecutions of all individuals involved in a meaningful fashion, top to bottom. That includes waving the company’s attorney-client privilege on this matter. Sending executives to prison has far more deterrent value that bringing a company down, since many will argue that employees who had nothing to do with the criminal activity would also be harmed.
My thought is that too big to fail is too big, period. Time to roll out the trust busters.
Yeah, but see, when you do bidniss wit’ people whose bidniss models involve actually eliminating the competition, otherwise known as making their troubles “disappear” – ya don’t wanna be too “harsh,” ye seeitumsayin?
Uncle Louie