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Senators Fault DOJ’s Failure to Prosecute Terrorist-Money Launderer HSBC Bank

Posted in Banks and Financial Services

If the DOJ catches someone laundering money for terrorists, I would expect that person to be on the receiving end of some very aggressive prosecution.  I wouldn’t want to see that person walk away – I would expect jail time or an equally serious form of punishment.  We would all be outraged if the DOJ said, “instead of prosecuting you, how about you just pay us back some of the profits you made while laundering that money and we’ll call it even.”  Sound far-fetched?  Well that is pretty much what happened at HSBC bank.

HSBC was caught laundering money for a  whole host of countries.  We are talking helping drug traffickers and other stand-up citizens from a list of countries that includes Cuba, Iran, Libya, Sudan and Burma, to launder their illicit narcotics proceeds.  HSBC used its Mexican and American affiliates to hide $800 million in illegal profits, in violation of numerous U.S. sanctions and laws.  How exactly did this happen at a supposedly “reputable” bank such as HSBC?

Simple, the same way big banks and corporations have done it for years, by looking the other way.  If each HSBC employee only sees a little piece of the picture, everyone can deny that they knew what was going on.  Meanwhile, pats on the back all around as the profits keep rolling in – just don’t ask why those profits are so high.  The DOJ explains in its press release that HSBC “fail[ed] to maintain an effective anti-money laundering program and [failed ] to conduct appropriate due diligence on its foreign correspondent account holders.”  For this “failure,” HSBC is charged a fine and given a “Deferred Prosecution Agreement,” in other words, they got away with it for now.

Really, DOJ?  Failure to supervise?  That sounds like a punishment better suited for a babysitter who let the kids eat too much candy.  It sounds woefully insufficient for a bank that is being held accountable for “permit[ting] narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries.”  The DOJ is definitely not lacking details about HSBC’s activities:

“a significant portion of the laundered drug trafficking proceeds were involved in the Black Market Peso Exchange, a complex money laundering system that is designed to move the proceeds from the sale of illegal drugs in the United States to drug cartels outside of the United States, often in Columbia.”

And, “at least $881 million in drug trafficking proceeds- including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Columbia – were laundered through HSBC Bank USA.”

I’m not the only one outraged by the DOJ’s wimpy prosecution effort.  Senator Chuck Grassley (R-OH) writes in a letter addressed to Attorney General Holder that “one international banking expert went as far as to argue that, despite the ‘astonishing amount of criminal behavior’ from HSBC employees, the [settlement] is no more than a ‘parking ticket.”  Senator Jeff Merkley (D-OR) is equally as disappointed in with HSBC’s slap on the wrist:  “Yet despite these clear and blatant violations, the Department of Justice refused to bring criminal charges against the bank, relevant employees, or senior management.”

I’ve written about this problem before, but now that Senators are asking the same questions, maybe we will finally get some answers.  While a bank might have to pay a civil fine, bankers and bank employees walk away from criminal conduct, be it money laundering or defrauding investors, with little or no punishment.  As Senator Merkley put it:

 “this ‘too big to jail’ approach to law enforcement, which so deeply offends the public’s sense of justice, effectively vitiates the law as written by Congress. Had Congress wished to declare that violations of money laundering, terrorist financing, fraud, and a number of other illicit financial actions would only constitute civil violations, it could have done so. It did not.”

Amen Senator Markley.  I am tired of seeing bad actors in the financial industry getting away with what would land individuals in jail.  You shouldn’t be able to launder money for terrorists or scam people out of their homes (see foreclosure fraud) and get away with it – no matter how big a bank you are.  I don’t care what you boss said about how your profit margins need to go up, if you engage in criminal behavior you should be put in jail like a criminal.  Until then, the bank executives’ scale will continue to tip towards “profits” and away from “legal.”

Do you have information about fraud in the financial services industry?  Have you been harmed as a consumer?  Contact Berk Law at (202) 232-7550 to discuss your legal rights.