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Tag: HSBC

Banks Too Big for Justice

img137Banks Too Big for Justice

Eric Holder Admits Some Banks Are Just Too Big To Prosecute

When the Attorney General of the United States admits some banks are simply too big to prosecute, it might be time to admit we have a problem — and that goes for both the financial and justice systems.

Eric Holder made this rather startling confession in testimony before the Senate Judiciary Committee on Wednesday, The Hill reports. It could be a key moment in the debate over whether to do something about the size and complexity of our biggest banks, which have only gotten bigger and more systemically important since the financial crisis.

“I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy,” Holder said, according to The Hill. “And I think that is a function of the fact that some of these institutions have become too large.”

Holder’s comments don’t come as a total surprise. His underlings had already made similar confessions to The New York Times last year, after they declined to prosecute HSBC for flagrant, years-long violations of money-laundering laws, out of fear that doing so would hurt the global economy. Lanny Breuer, formerly in charge of doling out the Justice Department’s wrist slaps to banks, told Frontline as much in the documentary “The Untouchables,” which aired in January.

Eric Holder Admits Some Banks Are Just Too Big To Prosecute

I have said several times before that there are two standards of justice in this country. If you had any doubts as to the truth of that statement, this should end them.

It is a sad day when certain corporations have essentially gained the powers and immunities of sovereign states.

What horrors, what crimes, are we yet to suffer, when the law cannot protect us?

James Pilant

 

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Two Standards of Justice

Two Standards of Justice

Senator Elizabeth Warren

Senator Elizabeth Warren

Elizabeth Warren: Banks Get Wrist Slaps While Drug Dealers Get Jail

During a Senate Banking Committee hearing about money laundering, Warren (D-Mass.) grilled officials from the Treasury Department, Federal Reserve and Office of the Comptroller of the Currency about why HSBC, which recently paid $1.9 billion to settle money laundering charges, wasn’t criminally prosecuted and shut down in the U.S. Nor were any individuals from HSBC charged with any crimes, despite the bank confessing to laundering billions of dollars for Mexican drug cartels and rogue regimes like Iran and Libya over several years.

Defenders of the Justice Department say that a criminal conviction could have been a death penalty for the bank, causing widespread damage to the economy. Warren wanted to know why the death penalty wasn’t warranted in this case.

“They did it over and over and over again across a period of years. And they were caught doing it, warned not to do it and kept right on doing it, and evidently making profits doing it,” Warren said of HSBC. “How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?”

Elizabeth Warren: Banks Get Wrist Slaps While Drug Dealers Get Jail

We could start by marveling at the idea that any rational human being could contemplate a fine as a penalty for international subversion? This subversion involved laundering money so it could be used anywhere in the economic system, thus, making it available to pay for bribes, drug smuggling, murder and kidnapping.

We could wander casually over to our second problem which is bankers, especially the international and investment variety, and wonder what made them so special? It is a simple matter to document one law for them and one law for the rest of us. That is the why Ms. Warrent’s example hits home. We are living by two sets of laws, one harsh and punitive and another for the banks.

Let us conclude with out third problem, where do get off allowing banks to attack foreign governments? Can there be any doubt in anyone’s mind that laundering billions in drug cartel money is the equivalent of a direct attack on the nation of Mexico and a more minor, by comparison, attack on this country, the United States?

It might be better if instead of thinking of the HSBC bank as a financial institution but more as a hostile foreign power willing to exploit our financial system for profit. I believe that is a more accurate reading of how it views its status in the world.

I don’t think Mexico feels safer after we fined HSBC. They may not feel that we have sent a message to those who would empower those who actively kidnap and murder in their country?

How would you feel about this if you lived in Mexico? Does it make you feel secure in American protection anywhere on earth?

James Pilant

 

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HSBC Avoids Criminal Charges

HSBC Avoids Criminal Charges
HSBC Avoids Criminal Charges

HSBC Avoids Criminal Charges

Insight: How Colombian drug traffickers used HSBC to launder money | Reuters

In a typical transaction, a middleman in a drug cartel would offer to deliver consumer goods, such as computers or washing machines, to Colombian businesses on favorable terms. Another person in the United States would buy the goods from firms using funds from drug trafficking, and fulfill those orders.

Money launderers exploited the laxness of HSBC in policing shadowy money flows, the Department of Justice said earlier this month. Failures included not conducting due diligence on customers, not adequately monitoring wire transfers or cash shipments and not having enough employees to run anti-money laundering systems. U.S. Assistant Attorney General Lanny Breuer called the lapses “stunning failures of oversight.”

The situation was so bad, according to the Department of Justice, that in 2008, the head of HSBC’s Mexican operations was told by Mexican regulators that a local drug lord described the bank as “the place to launder money.”

The Chaparro probe, led by ICE and the Justice Department, converged over the past two years with two other investigations – led by federal prosecutors and investigators in West Virginia and by the Manhattan district attorney – resulting in this month’s settlement with HSBC.

HSBC and its employees avoided criminal indictments, as the bank agreed instead to a deferred-prosecution deal that forces it to strengthen controls and accept a compliance monitor.

Insight: How Colombian drug traffickers used HSBC to launder money | Reuters

Where to start? This bank has committed crimes on a scale almost beyond comprehension.

Our first question; is this good business ethics? Under Friedman analysis that a corporation’s sole purpose is to serve the shareholders, the HSBC’s actions were a marvelous success. The bank paid a fraction of its profits on its wrongdoing. Further it evaded any prosecution and the resulting loss in prestige and publicity damage that would have resulting from actual criminal punishments. But even more important when looking at the profit side of the ledger, a precedent has been set that if a bank has reached a certain size, it is beyond prosecution. This insures that banks of this size can in the future launder money with confidence that it will both be profitable and free from criminal charges.

Is this bad business ethics? The bank laundered about nine billion dollars in drug money from the Mexican cartels. These financed the drug trade smoothing the shipment of drugs into the United States and other countries. It paid for assassinations and kidnappings, bribery of public officials, and the creation of large heavily armed criminal mafias capable of exerting control over large geographical areas. The was at the very least a subversion of the government and economy of Mexico. Similar but smaller effects were felt in the United States.

However, this is not the whole story, the banks also laundered money for Saudi and Bangladeshi clients who were highly likely involved in terrorists activities and in some cases known have links to terrorists. I don’t think I need remind you that the United States has embarked and continues a “war” against terrorism. The bank actively subverted that war. In addition, the money helped finance rogue regimes like Iran in defiance of American sanctions, strengthening the nation’s enemies, and making those regimes more able to resist reform and democracy.

There can be no doubt that the religions of Christianity, Islam, and Judaism and a giant list of smaller religions would find these acts in violation of their rules of ethical conduct.

Philosophically, unless you consider Friedmanism, a legitimate source of wisdom, almost all philosophical schools with the probable exception of Nietzsche, would condemn the bank’s actions.

Capitalism is in a crisis. This is not an isolated example of few individuals’ greed. This is a giant financial institution deliberately acting against the interests of its host countries and financing murder and mayhem around the world. But further, have we not seen banking incompetence and law breaking on a massive scale on a regular basis since the 2008 financial crisis. This hardly seems to be passing phase.

This particular bank makes more money than most of the nations on earth. Its power to cause harm is enormous and it deliberately, over a long period of time, with direct knowledge of its leadership, caused that kind of harm.

This is a moral and ethical bankruptcy that is not just wrong but endangers the long term welfare of citizens in the United States and the rest of the world.

It’s hard to think of any phrase more sad when have knowledge of these crimes than, HSBC Avoids Criminal Charges.

James Pilant

From Matt Taibbi, Rolling Stone

Though this was not stated explicitly, the government’s rationale in not pursuing criminal prosecutions against the bank was apparently rooted in concerns that putting executives from a “systemically important institution” in jail for drug laundering would threaten the stability of the financial system. The New York Times put it this way:

Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system.

It doesn’t take a genius to see that the reasoning here is beyond flawed. 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.

From further down in the article:

On the other hand, if you are an important person, and you work for a big international bank, you won’t be prosecuted even if you launder nine billion dollars. Even if you actively collude with the people at the very top of the international narcotics trade, your punishment will be far smaller than that of the person at the very bottom of the world drug pyramid. You will be treated with more deference and sympathy than a junkie passing out on a subway car in Manhattan (using two seats of a subway car is a common prosecutable offense in this city). An international drug trafficker is a criminal and usually a murderer; the drug addict walking the street is one of his victims. But thanks to Breuer, we’re now in the business, officially, of jailing the victims and enabling the criminals.

This is the disgrace to end all disgraces. It doesn’t even make any sense. There is no reason why the Justice Department couldn’t have snatched up everybody at HSBC involved with the trafficking, prosecuted them criminally, and worked with banking regulators to make sure that the bank survived the transition to new management. As it is, HSBC has had to replace virtually all of its senior management. The guilty parties were apparently not so important to the stability of the world economy that they all had to be left at their desks.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213#ixzz2GhlpEBQs
Follow us: @rollingstone on Twitter | RollingStone on Facebook

From around the web –

From the web site, Wall Street on Parade:

The following are findings from the Senate report:

  • HSBC Bank USA, N.A., known as HBUS [pronounced H-Bus] functions as the U.S. nexus for HSBC’s worldwide network. HSBC has 7,200 offices in more than 80 countries and 2011 profits of $22 billion; HBUS has 470 branches across the United States with 4 million customers. HBUS provides accounts to 1,200 other banks including more than 80 HSBC affiliates.
  • In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe anti-money laundering deficiencies, including a failure to monitor $60 trillion in wire transfer and account activity; a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity.
  • HBUS offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges. The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.
  • Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes. In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactions’ links to Iran.
  • HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.

From the web site, Hue and Cri:

The HSBC deal includes a deferred prosecution agreement with the Manhattan district attorney’s office and the Justice Department. The deferred prosecution agreement, a notch below a criminal indictment, requires the bank to forfeit more than $1.2 billion and pay about $700 million in fines, according to the officials briefed on the matter. The case, officials say, will claim violations of the Bank Secrecy Act and Trading with the Enemy Act.

Prosecutors found that HSBC had facilitated money laundering by Mexican drug cartels and had moved tainted money for Saudi banks tied to terrorist groups.

On November 11 HSBC said it had “reached agreement with United States authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws.” The bank is also expected to reach a settlement over the matter with Britain’s Financial Services Authority, according to a person with direct knowledge of the matter.

November 10, federal and state authorities also won a $327 million settlement from Standard Chartered, a British bank. The bank, which in September agreed to a larger settlement with New York’s top banking regulator, admitted processing thousands of transactions for Iranian and Sudanese clients through its American subsidiaries. To avoid having Iranian transactions detected by Treasury Department computer filters, Standard Chartered deliberately removed names and other identifying information, according to the authorities.

And finally from the web site, LIVINGLIES:

But HSBC is not being indicted and nobody will be criminally prosecuted because of the perceived or projected threat to the financial system if such a large bank and its officers were penalized criminally for commission of crimes that everyone agrees did take place. Why? Because HSBC is too big to indict.

The obvious answer here is to dismantle the mega banks that are so big that their every move produces swings in the financial markets. Instead DOJ and other law enforcement agencies have given a green light to anyone who can build a bank that big. They can now commit crimes with impunity, which is to say that we are guaranteed to see repeat behavior. Now when a smaller bank engages in the same illicit schemes, it too can point to the fact that law enforcement decriminalized what is clearly a crime under all applicable statutes.

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