The following is a press release from Global Witness, but as I agree with it, and have worked with Global Witness on many issues, I think it appropriate to share it:
Yesterday, Europe's largest bank, HSBC, announced that it will pay $1.9 billion (£1.2 billion) to settle allegations that it laundered money for drugs cartels, terrorists and pariah states. During approximately the same period that HSBC failed to check whether the dollars it was shipping from Mexico to the USwere drugs money, 47,000 people died at the hands of Mexican drugs traffickers.
“Fines alone are not going to change banks' behaviour: the chances of being caught are relatively small and the potential profits from accepting dodgy clients are too big. Fines are seen as a cost of doing business,” said Rosie Sharpe, campaigner at Global Witness.
“Instead, regulators should hold senior bankers legally responsible for their banks' money laundering performance. At the very least, senior bankers should be prevented from working in the industry, akin to the way in which doctors can be struck off. Bonuses should be clawed back, and, in the most serious cases, senior bankers should face jail,” said Sharpe.
According to the chair of the US Senate Subcommittee, HSBC's culture was ‘pervasively polluted'. The number of drugs cartels in Mexico makes it a high risk for money laundering. HSBC Mexico had high risk clients such as money remitters and offered high risk products such as dollar accounts in theCayman Islands. Despite this, HSBC US treated its Mexican affiliate as low risk. The result was that HSBC's Mexican operations moved $7bn in physical cash into the US between 2007 and 2008. Instead of prosecuting senior bankers, however, the US Department of Justice has entered into a ‘deferred prosecution agreement' with the bank, in which the bank is essentially granted immunity from prosecution in exchange for doing what they should have been doing all along. “If you get caught with your hand in the till you go to jail, but if you're a big bank and you're caught breaking the law, it seems that all that happens is you're fined and told you'll go to jail if you do it again,” said Sharpe.
Yesterday the UK's Home Affairs Select Committee said that fines against banks that aided money laundering and drugs trafficking were not enough. The Committee recommended personal, criminal liability for those who hold the most senior positions in banks that are found to have been involved in money laundering.
As well as prosecuting senior HSBC bankers, bonuses should be clawed back. Lord Green was appointed HSBC chief executive in 2003 and chairman in 2006, and is now the UK Trade Minister. “We estimate that Lord Green pocketed more than £25 million in bonuses and shares during his time at HSBC, despite the fact that the bank's own criteria for awarding bonuses is meant to take into account adherence to ethical standards; he should return this money,” said Sharpe.
HSBC accepted responsibility for its past mistakes and stated that it had comprehensively changed its approach to anti-money laundering compliance. The bank will be monitored by the Department of Justice for the five year term of the agreement.
I agree: only jail for senior executives will do.
Then bankers will realise the seriousness of what they currently permit.
And that applies to tax evasion too.
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Where are HMRC ?
Nothing will change until we do crack down on bank criminality and fraud. I have a feeling, as other people have said too, that if bankers started going to prison for 20 years for crimes of the sort you describe, I have a feeling the banking industry might decide to change their ways!
I couldn’t agree more. We need to not see banks and big organisations as faceless entities, but that behind all of it are people making decisions. Those people must take personal responsibility for the decisions they’ve made.
In addition, punishments must not just ‘fit the crime’, but fit the criminal. There’s no point punishing someone or something that has huge amounts of money by taking a bit of that away. They don’t mind losing a bit of money, that happens all the time in the course of a risk-taking business. What these people value is their freedom, so sending them to prison would be a massive deterrent.
The reason why sending unemployed, drug using, or repeated ‘petty criminals’ to prison doesn’t work is because they don’t have much freedom or much to live for in their day to day lives anyway, so taking away their ‘freedom’ isn’t a deterrent. When you’re already completely detached from society then being threatened to be removed from society isn’t that scary.
Bankers on the other hand have a lot to live for. If they knew that one of the consequences of their negligence or deliberate criminal behaviour was incarceration, then that would definitely do the trick.
In fairness, prosecution for Corporate Fraud is unbelievably difficult, verging on impossible. Each defendant will be well represented & each will blame someone else. Those at the lower levels will say “I doubted if it was right, but ‘X’ assured me it was & I wasn’t in a position to argue”, those at the higher levels will say”Y brought it to me as a done deal. I didn’t like the sound of it but ‘Y’ assured me it was OK & I didn’t want to seem dictatorial”,
Not making excuses, but you try prosecuting fraud ! It is much harder than you might think. These guys don’t snitch & make faces in the witness box & they always turn up in a nice suit & tie.
It should be easy to prosecute: directors should be liable for the actions of their companies
Why not?
Give me a good reason
Curious. Would have thought you would have wanted to stay well clear of subjects like government regulations & killings in Mexico. You know. Fast & Furious. Allegations of US Government agency involvement in illegal export of firearms to Mexico. Responsible for killing a lot of those 47,000 Mexicans.
Agreed. Why only senior bankers though? From the bottom to the top, there should be jail for anyone who made decisions on transactions. If a man in the branch accepts bags of loot and her boss says “don’t do the checks on this one” and then even if she is following orders, then clearly she has broken serious rules and both should get done. The same goes for the auditors too.
Nils Pratley has a piece on the same issue in todays Guardian, Richard. The worrying thing he comments on is:
‘But HSBC investors may also like something else. The New York Times reports that some DoJ officials wanted to bring criminal charges against the bank but eventually decided not to for fear such a move would put the future of one of the world’s largest banks at risk and thus threaten global financial stability.
We don’t know the weight of that tale and maybe the fear of financial chaos was exaggerated. But the idea that a bank could be “too big to prosecute” is alarming. It sends a message that, whatever the scale of wrong-doing, the world’s biggest banks can never lose their licence to operate overnight. Instead, a hefty fine can always make the problem go away.
Is that really a sensible message for regulators to send? Is their hand really so weak? On this occasion, HSBC’s words of contrition and promises to behave properly sound sincere. But will that always be the case for all big banks everywhere and forever?
The DoJ should clear up this sub-plot speedily. If money laundering on the scale admitted by HSBC doesn’t provoke a prosecution, what would?’
“If money laundering on the scale admitted by HSBC doesn’t provoke a prosecution, what would?’”
Regrettably, not only does money laundering on this scale not bring prosecution, it doesn’t even impel its main culprit to resign from either Government or the Church of England !
Unfortunately due to the wholesale corruption of the establishment in the US, the department of justice has apparently determined that these people are above the law, as this excellent article in today’s Guardian by Glen Greenwarld contends.
http://www.guardian.co.uk/commentisfree/2012/dec/12/hsbc-prosecution-fine-money-laundering
If that position stays then not only has democracy been completely overturned in the US (and as night follows day, here too if we continue to let them get away with it) but the bankers have been given carte blanche to commerically rape and pillage whatever they want with full authority from the DOJ.
Precisely.What’s now going on is not so much wealth creation as wealth expropriation from ordinary people to the financial sector.
Where have you been for the past four years?
Absolutely it’s time to jail some bank directors. It’s also high time TBTF banks were broken up into smaller units. The US authorities in this case admit that HSBC was too big to indict meaning one law for the big and another for the rest of us.
http://dealbook.nytimes.com/2012/12/10/hsbc-said-to-near-1-9-billion-settlement-over-money-laundering/?ref=business
A very angry and salutary piece on this by Rowan Bosworth-Davies:
“Why I am so angry about the regulatory failures which have resulted in our banking sector becoming a global pariah! ”
http://rowans-blog.blogspot.co.uk/2012/12/why-i-am-so-angry-about-regulatory.html
I’m not sure venturing into bravado territory is wise. We are dealing with corporatocracy/neoliberal capitalism/ fascism. Corporate socialism (David Cay Johnston) is good as well. I also like terms like mafia capitalism or (John Perkins, again) predatory capitalism. I quite like vampire capitalism. Those labels are not in reference to bad apples or isolated incidents. That’s the system and it’s players are mostly on board the neoliberal project.
We are not beating the bad guys. They are winning just as the planet is melting and our liveable earth will soon be beyong anyone’s, or any group’s, ability to rescue from that.