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HSBC Money Laundering Scandal: More Racketeering

Posted by Larry Doyle on December 11, 2012 8:42 AM |

Can you imagine if those involved in organized rackets including prostitution, drug dealing, human trafficking and the like were able to resolve their criminal activities by merely paying a fine?

What do you think their response would be? Do you think they would take a vow of chastity and then look to engage in upstanding business? Of course not. They would think “how the hell do we get that money back?”

Human nature being what it is, are we to believe that simply because executives of a banking institution issue a few mea culpas, accept some tough language, clawback some individual compensation, and profess to clean up their act BUT FACE NO INDIVIDUAL PROSECUTIONS might really change their stripes? Or are they inclined to think, “how the hell do we get that money back?”

Can you imagine the facial expressions on those connected to the Gambino and Genovese operations if they ever got this lucky?

Let’s delve into the next institution that pretended to be a bank but was really running  a laundromat. What  institution is this that deserves to receive the Emmy, the Oscar, the Grammy, and the Tony Award for Money Laundering and Racketeering?


As reported overnight by the UK-based The GuardianHSBC Pays Record Fine To Settle US Money-Laundering Accusations

HSBC is to pay a record $1.9bn (£1.2bn) to settle allegations that it laundered money for drug cartels and broke sanctions in the US to allow terrorists to move money around the financial system.

In the latest embarrassment for Britain’s banks, HSBC chief executive Stuart Gulliver said he was “profoundly sorry” as he confirmed the scale of the fine. It is the largest ever for such an offence and even greater than the £940m the bank had feared it faced after the allegations first surfaced in the summer in a report by the US Senate.

“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again,” he said, insisting Britain’s biggest bank was “a fundamentally different organisation” now.

Gulliver was promoted to chief executive two years ago during a management reshuffle caused by the decision by Stephen Green, the chairman, to quit to join the government as a trade minister.

Are you kidding me? The former chairman during a period when these rackets were being run is now appointed as a trade minister in the UK? I can only chuckle thinking that an apt comparison would be the naming of Vinny “The Chin” Gigante to be the US Secretary of Commerce. You cannot make this stuff up, folks!!

A spokesman for the Department of Business, Innovation and Skills, which Lord Green represents, said: “The report by the US Senate sub-committee sets out in detail the evidence submitted to it and the action taken by HSBC to ensure compliance with US regulations at the time that Lord Green was group chairman. At the time of the report’s publication HSBC expressed its regret that there were failures of implementation and Lord Green has said that he shares that regret.”

Really? He shares the regret? How sweet. Meanwhile what about the growth in the criminal enterprises and terrorist activities facilitated by the HSBC laundromat. What about the individuals and families that were impacted by the filth and corruption that polluted our social fabric? Sorry does NOT cut it!!

David Bagley, the bank’s head of compliance, dramatically quit before the US Senate committee hearing into the case in July and on Monday HSBC named a former US official – Bob Werner – as head of group financial crime compliance, a newly created role, as the bank prepared for the fine related to drug allegations.

You think Mr. Bagley might be able to withstand an indictment and prosecution? You think he might be able to share a thing or two about the laundromat?

The penalty includes a five-year agreement with the US department of justice under which the bank will install an independent monitor who will assess the bank’s changed internal controls and HSBC has managed to avoid being criminally prosecuted – a move that could stopped the bank operating in the US at all.

HSBC’s share price rose by 2.8p to 644p despite the size of the fine. Ian Gordon, banks analyst at Investec, said the fine was slightly lower than the $2bn he had been pencilling in to his forecasts. But, he said: “HSBC’s settlement with the US authorities will include a deferred prosecution agreement with the department of justice of five years’ duration. Given HSBC’s ongoing US business and other continuing conduct investigations, this Sword of Damocles is not without teeth, albeit based on what we know, we are regarding the $1.921bn settlement as de facto ‘final’.”

There you go. Write the check and life goes on.

Gulliver stressed that the bank had co-operated with the US authorities. “Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters,” he said.

“We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world,” he added.

The US Senate said the bank had operated a “pervasively polluted” culture that lasted for years, allowing HSBC to move billions around the financial system for Mexican drug lords, terrorists and governments on sanctions lists. HSBC’s Mexican operations moved $7bn into the US operations, for instance, which the Senate was told was tied to drug money.

HSBC said it also expected to finalise an “undertaking” with its home regulator, the Financial Services Authority, “shortly”.

The embarrassment for HSBC comes barely 24 hours after Standard Chartered paid £415m to US regulators, and as banks brace for a wave of fines for attempting to rig Libor following the £290m penalty slapped on Barclays in June.

Interesting corollary here. Do you think that there is a very real possibility that those within HSBC and elsewhere involved in money laundering knew that regulators were in their hip pocket based upon their  ability to manipulate Libor and/or vice versa? I have no doubt. I mean, how many rackets that started out dealing drugs then also realized that there was good money to be made in prostitution? PLENTY!!

I would also maintain that this situation and the laundromat operated by Standard Chartered are a de facto indictment of the ineffectual financial regulatory system and Department of Justice here in the US. Do those in Washington think that the public distrust of Wall Street specifically and banking at large does not grow ever stronger by the mere imposition of fines such as these?

Gulliver repeated that the bank had clawed back bonuses of those involved. The bank has also spent $290m on improving its systems to try to avoid a re-run of the events.

How nice of them. $290m to improve systems and a large fine for years of racketeering. Sounds like little more than a cost of doing business to me.

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • Peter Scannell

    During the eight plus years, 2000 to 2008, that our nation was being unwittingly plagued by the incomprehensibly massive financial frauds that have resulted in our current and continued abysmal economic condition, the most comprehensive and far reaching investigation that garnered the attention of our congressional leaders concerned whether or not Roger Clemens was using performance enhancing drugs.

    As I told a congressman a few years back – “all you had to do was look at Roger’s bloated head and fat ass to know he was juiced up.” His reply was, “yes – that was ridiculous.”

  • Ginny

    I remember when only gaming was questionable – but that was before they kept the monies in a bank. I think the safes were a better idea… Nobody would have figured out how much there was in it to launder …

    Aloha, Ginny

  • So, another super fat financial entity escapes with a fine and all is forgiven. As to the 5 year condition–that’s already a forgotten “maybe”.

    I wonder how much money was made in fees, interest, investments, points, etc? Something wiould lead me to believe that a $1.921bn fine would pale in comparison.

    One more example of there are laws for the average inhabitants of this planet and there are laws for the small businesses owned by those inhabitants. But, if firms and people are big enough to create your own gravitational pull (aka, bribes, favors, campaign contributions) then they are free of such bounds. And those laws are nothing more than a slight inconvenience, if not a total nuisance.

    Add this latest revelation to the pile that includes such fraudulent and manipulative practices such as LIBOR and those ever popular derivative packages. Just think if we practiced the rule of law for all things in accordance to these examples—we would eliminate the need of every jail and nearly all prisons.

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