Not sure that mixing asset forfeiture laws and non-prosecution of industrial scale money launderers make for a clear argument...
But the rich escaping with a slap on the wrist where the poor gets jail time is nothing new, if I was any more lefty I'd say it's paving the way for a hardcore revolution, but then it's been going on for decades, people are just too apathetic...
Saying it's nothing new is nothing new. Let's change that mentality!
And revolutions usually take many generations to get to a boil. In these days given information flows a lot faster, it's going to take two or three instead of ten or fifteen generations.
It's just like scientific ideas, they become mainstream when the status quo defenders who are mistaken die.
Thankfully people are more interested in Lindsay Lohan latest binge drinking bout than in how some get away with making billions of money laundering...
No revolution is coming, at least as long as the people are entertained, and not too hungry.
You're part of the apathy. Not a great way to bring change.
Nevertheless, as the rest of the world shows, there are people interested in change (see Kiev, Egypt, among others)
Heck, even the Occupy movement showed there are people in the US itself worried about change.
I wouldn't discount a massive revolution in our lifetime. It depends on how hard and how far politicians and oligarchs push, and on the other hand, on the appearance of appropriate leaders.
"It depends on how hard and how far politicians and oligarchs push"
As long as they give scraps of the pie to enough people, nothing will happen. Lets get realistic, 99% of HN lectorate benefits from the status quo, me and likely you included...
The laws of the USA suggest that corporations that are convicted of two felonies are subject to a corporate death penalty, but given the continued non-punishment of perniciously malicious companies like HSBC and Pfizer, don't expect the US Department of Justice to act anytime soon.
US drug laws are actually just about keeping people who may vote for democrats out of the voting pool wrapped around a layer of public health stigma and "scary minorities terrorizing white people" images.
Well, all the drug laws started in the early 1900s and their rationale is forgotten unless you find a documentary or do research somewhere.
For example, the reason opium dens were outlawed in San Francisco is because they got very popular with the chinese laborers and that upset the white establishment. So, the white lawmakers got together and made a campaign about "chinese men on drugs are stealing your white women." Soon after, SF outlawed opium dens to punish the chinese workers for, well, the falsely manufactured epidemic of all upper class white women falling in love with chinese railroad workers and leaving their white husbands in shame.
The ruling class has a mind of continuance and more restriction, not clearing out the cruft from long ago.
Well, if 90% of your population is high and unproductive, that makes you ripe for invasion. There's a difference between fixing a problem collapsing society and targeting groups to punish them for your own gain.
Chinese-patronized opium dens were banned. Tincture of laudanum (opium rum) was still available at every drug store.
The history of drug prohibition is a process of cracking down on one minority group after another in order to get votes. Opium: chinks. Marijuana: niggers. LSD: smelly hippy sluts. Methamphetamine: poor white trash/wiggers. Visible booze bottles: bums.
under duress with the likelihood of the withdrawal of aid, trade, or unilateral sanctions. You do realize the united states is a permanent member of the security council?
They're also about providing government kickbacks and cheap slave labor to the prison-industrial complex. Not to mention the free stuff for police departments seized from citizens.
There are a lot of people who benefit from the war on drugs, who also share responsibility for perpetuating it.
1. Doing illegal drugs: Not Ok, jail.
2. Making illegal drugs: Not ok, jail.
3. Selling illegal drugs: Not Ok, jail.
4. Making tons of money off of people who do sell illegal drugs: Partially Ok (just pay a small fine).
I am just wondering why did Dread Pirate Roberts go to jain and Lanny Breuer did not. Both were facilitators of Illegal narcotics trade, except what HSBC did was orders of magnitude larger scale than that of what Silkroad did.
One can argue that the people were removed from knowing exact nature of all transactions but trust me this won't float - you either recklessly incompetent or insidiously corrupt and involved in what is happening, especially when it happens on this scale.
regardless, war on drugs is more or less like prohibition - way to control the masses without loosing face in front of elderly conservative public - who votes.
This article seems to be from last year. The AUSA in question is now back at white shoe law firm Covington & Burling, doing white collar criminal defense work.
Given that he's run off to collect a pay check in a new position created for him at Covington & Burling LLP, a firm well known for representing various major banks, I imagine they'll be getting plenty of work from HSBC in the future.
If it makes you feel any better, it's sort of not a UK bank (Hongkong and Shanghai Banking Corporation). It's only fairly recently that the company repatriated itself.
... of a bank who is present in the US. That how it works - last time a big US software company got a huge fine by the EU for monopolistic behavior. :)
I'm not sure that is a very good comparison. That big US software company was practicing monopolistic behaviour in the EU. If IE was only forced on Mexico-based customers, do you think it would have ever even come to trial in the first place (in the EU)?
The moment you push any kind of culture underground you automatically make it harder and more expensive to control. So the smarter move would be to legalise the less harmful drugs but create a safe, controlled environment for sale and usage.
While some of the more conservative people out there might disagree with people taking drugs, the fact remains that people do want to get high and thus those people will always find way to do so. To me, it makes more sense not to turn those people into outlaws and instead concentrate your efforts on tackling those who turn to drugs for non-recreational reasons (eg resolving addiction and/or peoples dependency on stimulants for escapism. Those individuals usually have other real life issues and -wrongly- turn to drugs as their "fix").
This will never happen though because drugs are given such a bad connotation in the press as the roots of all evil. Not all drugs are equal; whose which are proven to be relatively harmless compared to tobacco or alcohol are given the ridiculous label of "gateway drugs" - as if anyone who smokes two puff of a joint will automatically end up on the streets shooting heroin. If we want people off the harder drugs then we have to teach kids that not all drugs are equally bad - and to do this we need governments to send a saner political message about their stance on drugs.
From a personal perspective, I've done a few "magic mushrooms" at festivals in my younger years. They made me a little giddy but at no point did I rape, steal nor murder. In fact I was more pleasant company than when I've been drinking (and I'm not a rude drunk by any means). Yet since then, the UK government has made magic mushrooms illegal. It's just absurd to think that my previous actions, which were entirely harmless at the time, are now illegal. And when kids experiment (as many kids often do) they too will learn that government legislation is broken towards "softer" drugs. Which will make then re-evaluate their opinion about their governments stance on all drugs. So the government are really just wasting their own time and our public money by continuing on this charade that all recreational chemicals are evil.
The most hypocritical thing of all though, is I bet a great many of those in power have smoked weed at some point when they were teenagers / young adults (as we saw in the UK with the amusing yet frustrating confessions a few years back where several politicians came forward and admitted to "smoking but not inhaling". sigh
Actually Clinton is allergic to smoke, and was well known on campus for making hash cookies which is why he said 'never inhaled' because he ate weed instead. Too bad he went on to throw countless people in prison for doing exactly what he used to do.
> "Actually Clinton is allergic to smoke, and was well known on campus for making hash cookies which is why he said 'never inhaled' because he ate weed instead."
UK != US. So it stands to reason that I wasn't talking about Clinton specifically. But it's amusing to see the same stories happening on both sides of the pond.
We have only seen the erosion of prohibition of a single drug. For everything else we are still seeing more of the same -- in the same period of time where states have relaxed marijuana prohibition, numerous other drugs have been made illegal.
> We have only seen the erosion of prohibition of a single drug.
Everything starts somewhere. If the factors that were posited as insurmountable in the defense of drug prohibition really were, we wouldn't see legal progress against prohibition at all. The fact is that is that those factors, even if they are accurately described as the motivations behind legal prohibition, are demonstrably not insurmountable.
Too big to fail is too big. Would it really be so bad if we simply outlawed companies exceeding a certain number of employees? HSBC recently had about a quarter of a million people, which is just insane. When things get that big, nobody fully understands what is going on anymore, even at a basic level, and it does become plausible that terrible actions are taken with literally no one to blame, either because nobody is sure where the blame lies, or because the would-be accusers are scared of the systemic risk (which these days is very real).
I propose that twenty thousand people ought to be enough for any company. Having more, smaller firms will improve the job market for individuals, reduce the burden of mega-powerful interests in government acting against the population as a whole, and provide more genuine opportunities for real leadership to a greater number of people.
A gradual phase-in could be used, say max 500K employees by 2020, 200K by 2025, 100K by 2030, 50K by 2035, and 20K by 2040. And no funny business: one person cannot have a controlling interest in companies whose employee counts exceed the limit in aggregate.
Not a good idea. Wal-mart has over a million employees, but is not too big to fail. Problem with the financial sector is that everything is inter-connected. Long Term Capital Management was deemed too big to fail, yet the number of employees was tiny.
Are you sure Wal-Mart isn't too big to fail? Do you live in a place where it is dominant? A lot of Americans do now live in such places, where Wal-Mart has out-businessed smaller shops. If your choices of where to shop are pretty much limited to Wal-Mart, Costco, and Home Depot, where does that leave you if one of them does something really bad? Do you think the US would be all right if all the Home Depots closed tomorrow? It would not be all right. Twenty years ago there was no such thing.
In my area (Midwest), Walmart, Costco and Home Depot have some competition that would love to pick up that slack. Meijer is a super store challenger to Walmart, with Spartan Stores/D&W/Family Fare and Kroger challenging Walmart for food. Home Depot has Lowes (pretty sure they're nationwide). Costco has Sams Club (part of Walmart) for general merchandise and GFS Marketplace for food. The real monopoly in my mind is Best Buy. I don't know how they stay open, but I certainly don't see any competitors in my area.
Walmart may drive out mom and pop stores, but there are plenty of regional chains still around.
I live in Boston, MA, and I have not shopped at a Wal-mart except when I was in China. I'm quite optimistic that other supermarkets will be able to fill its shoes if Wal-mart were to fail.
Perhaps Wal-mart is not a good example. My point is that when a 25000 employee company in any other industry fails (size of Lehman Brothers when it failed), the ripple is much smaller, and therefore, capping the number of employees is not a good idea. I do agree, however, that TBTF is bad. No entity should be TBTF and hold the country hostage.
It's not like other retailers wouldn't move in pretty quickly if WalMart suddenly vanished for some reason. They are big, but they are not the only game in retail.
They certainly are too big to fail. Do you really think the government would take steps that would lead to Wal-Mart going out of business and putting those million people out of work, and the communities that depend on Wal-Mart for retail service and tax revenue, in the lurch? I don't.
Wal-Mart is TBTF, the question is whether there's anything the government could do that would cause it to catastrophically fail (and thus whether or not there's a moral hazard involved). In the case of Anderson, the government indictment killed the firm because no one wanted to be audited by a firm indicted for fraud. In the case of banks, there are automatic sanctions that go into place upon a criminal conviction that would constrict the ability of the bank to access capital markets, and thus could conceivably lead to rapid collapse. It's hard to see anything similar that could be done to Wal-Mart. If convicted of a crime most likely it would just pay whatever the fine was and keep doing business.
On the other hand, take a business like Boeing -- that's both TBTF, largely because of it's giant workforce, and vulnerable to rapid collapse if government sanctions, such as those stemming from criminal conviction, made it ineligible for US government contracts (such contracts make up around 40% of revenue).
As for the grandparent's proposal rather than a hard cap, I'd prefer to see some sort of feedback mechanism to counteract natural economy of scale effects. Perhaps some sort of escalating tax rate (per employee maybe or some combination of employee and revenue). For industries like banking with acute dangers something more tailored might be in order -- taking into account balance sheet size, nominal outstanding transactions, and counterparty centrality.
This is not a good approach. There are companies with extremely high number of employeees, but no real systemic risk, etc., especially in manufacturing (see Foxconn) and among large conglomerates (Siemens). Correlatedness (and leverageÖ must be dealt with, not merely company size.
Not sure your examples are good ones. Foxconn isn't exactly known for maintaining good quality of life for its employees. I don't care if it's "good compared to the rest of China", it's not objectively good, and we continue to support dozens of corporations that do business with them.
And Siemens was able to use their ever-expanding reach to be able to let the US government slip malicious code into unknown numbers of scientific equipment to jump the airgap into Iranian nuclear facilities. But that's just the stories we know.
Across the political spectrum, considerable anger, frustration and range is directed either at big business or at big government. Clearly, the thing that unites these viewpoints is the presence of inhuman and impersonal scale, together with the inequitable concentration of power that this scale implies. For comedy effect, I shall conflate Mammoth and Mammon and term this fear of large organisations "Mammonthophobia". To this fear of the very big, I would add a second phobia, that of long-lived organisations; (Geriatrophobia?) for corruption comes to us all, and the longer lived an institution, the more deeply embedded the rot. The Peter principle captures the gist, but fails to convey the seriousness of the message, nor the sinister nature of the disease.
Other commentators have pointed out that size is difficult to measure. This is true. To these cautions I would add the ever-pertinent one that legislation breeds corruption. Too many people already make a living by exploiting tax loopholes & legislative weaknesses (Private Equity, I am looking at you).
Placing these practical concerns to one side, I think I would be rather more radical than you in my goals. Team sports give us a good idea of what a human-scale team looks like - between 5 and 20 individuals. I am less sure what the longevity of a business should be: between 2 and 8 years seems like as good a guess as any. The ability to invest in the long term and to take on big projects is less inhibited by these restrictions than you might think: even the largest of today's businesses still need to raise outside finance and work together with other businesses to solve large problems; placing severe restrictions on the size of businesses will only help to increase the level of automation and systematic discipline when it comes to organising the crowd of small business-teams to take on large projects. In any case, we could hardly do any worse than our current economy on long-term planning and investment.
I am not sure how a government could encourage the formation of an economy formed largely of small, young businesses, I am only sure that it should.
Well, it could start by not unduly burdening the small companies with regulations that the big companies wrote, and in some cases even exempted themselves from.
My state, Virginia, recently passed a law that software contractors will need to be licensed in Software Engineering by the IEEE. The license test is only offered twice a year, costs several hundred dollars, and covers no topics on programming. And, if you're a corporation of a particular minimum size (that is particularly large), you're exempt from the requirement because supposedly such a large company would already be interested in protecting themselves from liability, so would conceivably be vetting their programmers. Except we know they don't, because there is no way to vet programmers like that, if the IEEE test is being held up as the standard.
I have been entertaining this idea a lot, and I think it makes a lot of sense, and not just because of the potential failure. When a company becomes too big, the virtue of free market economy disappear more and more the bigger the company. This and their undue influence on governments due to their sheer size. Don't allow them to become too big, this will create a healthy free market economy because of all the added competition. Some would argue "economy of scale" etc. but I argue that more healthy competition is what helps customers, not giving more power to these monsters.
Note that by the time you get to company 49 they still employ more than 126,000 people.
EDIT Sorry I guess my point wasn't clear. My point is that employee size is a very poor measure of a company being "too big to fail".
Let me lay it out like this. Consider a fictitious burger company with 20,000 employees. With 50 states it can only employ 400 people in each state. If it went bankrupt it's very hard to see how this is "too big to fail".
Responding to your edit: I don't think his point was that 20,000 was too big to fail. The point is that 20,000 is too big, period.
Any company over a certain size (certainly way less than 20,000) institutes internal procedures for smaller groups within the company to coordinate. How would we not all be better off if those smaller groups were independent competing actors?
The proposal is foolish because it would impact a substantial number of businesses? I don't understand the logic: if it impacted few or no businesses, then it would be pointless. Since it is impactful, then it is foolish?
Recall that I gave a timeline of some two decades for phased implementation. Also note that a franchise model could serve many retail stores well. Subway sandwich shops are roughly as numerous as McDonalds, but the corporations themselves have nowhere near the same number of employees. A franchise model could be used for roughly half the companies in your list.
Isn't it more foolish to have dozens of companies that would destroy large parts of the country if something went really wrong with them? Haven't we learned that lesson by now?
While some corporations are too big to fail, managers aren't. The article mixes these to things - it's probably ok (given current economic climate) to leave the bank be and fine it, but it's definitely not ok to not prosecute and send to jail people responsible for laundering. Prosecution of high-ranking bank officers would launch a political career, so I guess there just wasn't enough evidence.
Ah Matt Taibbi... guaranteed unbiased reporting on banks.
It's not clear whether any employees knew they were facilitating money laundering. What HSBC has been found guilty of (and what they are being fined for) is lacking sufficient controls to detect money laundering activity. This is quite different to wilfully and knowingly assiting money laundering for drug cartels.
All sorts of businesses are part of the cash economy and pay in large amounts of cash on a daily and weekly basis. The worst critiscm you can level here is that a lowly-paid cashier was insufficiently trained to spot potentially dubious sources of cash that were being paid in.
Actually reading the whole article... it's just sensationalist drivel. There is no claim compliance officers were laundering money. In fact a compliance officer goes no where near money. Bonus clawback is in reponse to weak controls, not becuase they were in the employ of drug cartels.
If they weren't a bank it wouldn't matter - that's the point of the article. People have had their entire homes confiscated because one of their kids was drug dealing and they didn't realise, yet when banks assist drug dealers the Government doesn't even take all the money they made from doing so.
I don't believe that your interlocutors are anti-bank per se, but instead they are raising concern about unequal treatment under the law. In this case, the banks are the benefactors and the individual, by comparison, would be the loser were he/she to encounter a similar situation.
These sorts of laws are all about intent. The reason individuals tend to lose in these situations while large organizations do not is:
1) Large organizations spend a ton of money and effort on legal compliance, while individuals and small organizations do not;
2) It's much more difficult to impute intent onto a large organization that is incidentally exposed to criminal activity as a matter of course.
The basic fact is this: if you're a bank operating in Central or Latin America, your accounts will be used for money laundering to some degree. This is true no matter how strong your controls are. This is just the nature of being an institution that offers banking services to the public in a country that is flush with drug money. However, if you're an individual and your accounts are used to launder drug money, that gives rise to a totally different inference of intent. Individuals rarely find themselves incidentally or accidentally involved with money laundering.
Yes, large organizations tend to get the "benefit of the doubt" in such cases, but it's wholly warranted.
They don't get the benefit of the doubt. Prosecuting HSBC and its officers would be a mammoth undertaking costing hundreds of millions or billions of dollars. The reason HSBC (or any other large organization) pleads guilty or enters into a non-prosecution agreement is that it usually lets them off for less (on a risk adjusted basis) than fighting. The prosecutors also don't want to spend the several years in litigation so they get a scalp to carry in front of the cameras to claim that they are being tough.
If we were serious as a country about compliance with our laws we would have just stripped them of their US banking license. Of course this would have rather large ramifications for many other people that would mostly be bad.
Except if you're a big and important bank, then things like 'zero tolerance' don't really apply. You then just get a slap on the wrist for insufficient controls.
Note that they chose not to indict HSBC. it's not that they didn't have enough to go on.
It's the fourth or the fifth time they've been caught "lacking sufficient controls to detect money laundering activity" in something like 15 years. If that is not "wilfully and knowingly", I don't know what it is.
Actually, HSBC has openly admitted to knowingly and willfully taking active steps[#] to disable specific automated countermeasures put in place to prevent money laundering, as well as deliberately under-staffing departments responsible for AML compliance. There is little question as to their guilt or complicity.
"HSBC Bank USA knowingly set the
thresholds in CAMP so that wire transfers by customers located
in countries categorized as standard or medium risk, including
foreign financial institutions with correspondent accounts,
would not be subject to automated monitoring unless the
customers were otherwise classified as high risk."
Yes, so what? There is nothing in this wording that suggests that thresholds were set deliberately to facilitate money laundering. It's just a statement of where the threshold was set. Perhaps in retrospect it was too weak, but given the volumes of cash a bank like HSBC processes I'm sure they were trying to strike a balance between appropriate oversight and what's operationally feasible.
your argument might carry more credibility if the rest of the document did not go on to extensively document the backdrop against which this and similar decisions were made. in fact, that's the entire point of this document.
There's nothing in the "backdrop" of the document that refutes retube's argument. All it does is suggest that HSBC wanted to avoid the cost and hassle of subjecting transactions in Mexico to a higher level of scrutiny than transactions in other countries. That's a weakness in a regulatory control, not a crime.
I don't understand the point you are trying to make.
The document outlines a pattern of decisions by high level HSBC executives -- ranging from individual transgressions such as simply falsifying or sanitizing otherwise illegal transactions, to more long-term choices, such as ignoring basically everyone else in the industry as you mentioned earlier, and systematically under-resourcing compliance departments -- that led the bank to appear to comply with AML laws and regulations when in reality it was flagrantly violating them.
In fact, it is a crime to fail maintain an effective AML program if you are a bank, and HSBC does not dispute that they committed this crime.
From the document, page 3:
7. The Department alleges, and HSBC Bank USA admits, that HSBC Bank USA’s conduct, as described herein, violated the BSA. Specifically, HSBC Bank USA violated Title 31, United States Code, Section 5318(h)(1), which makes it a crime to willfully fail to establish and maintain an effective AML program, and Title 31, United States Code, Section 5318(i)(1), which makes it a crime to willfully fail to establish due diligence for foreign correspondent accounts.
Which is correct behaviour and what governments all ask banks to do, believe it or not. It's called the "risk based approach" in the AML jargon.
The problem with AML laws is that they are so vague, it's impossible to ever really be sure you're in compliance. They turn banks into a privatised police force. How much effort should they make? Governments won't tell. They just say "be sensible about it". Banks hate this, as would you in their position, they want clarity about what to do, but governments don't want to give them a list of boxes to tick because they feel it'd be too slow and inflexible to keep up with criminals.
See the problem? Banks invest VAST sums in AML compliance. They develop automated software to spot suspicious transactions, they have massive internal compliance departments, they ID verify all their customers. It's a huge, huge drain (which is passed on to all of us, of course). But how much is enough? As far as the Justice Department is concerned, there can never be enough. Whilst criminals exist, it must mean failures of compliance by banks.
I'm not saying that the laws aren't overly vague or in need of improvement. But classifying Mexico as a low-risk country despite KNOWING that it's high-risk was not an accidental misinterpretation of what was expected from them.
14. HSBC Bank USA maintained correspondent accounts for a
number of foreign financial institutions, including HSBC Group Affiliates, within its Payments and Cash Management (“PCM”) business. HSBC Bank USA was required under the BSA to conduct due diligence on all foreign financial institutions with correspondent accounts, including HSBC Group Affiliates.
15. Despite this requirement, from at least 2006 to 2010, HSBC Bank USA did not conduct due diligence on HSBC Group Affiliates for which it maintained correspondent accounts, including HSBC Mexico. The decision not to conduct due diligence was guided by a formal policy memorialized in HSBC Bank USA’s AML Procedures Manuals.
...
17. From 2006 to 2009, HSBC Bank USA knowingly set the
thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk. During this period, HSBC Bank USA processed over 100 million wire transfers totaling over $300 trillion. Over two-thirds of these transactions involved customers in standard or medium risk countries. Therefore, in this four-year period alone, over $200 trillion in wire transfers were not reviewed in CAMP.
18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions. These included:
a. The U.S. State Department’s designation of Mexico as a “jurisdiction of primary concern” for money laundering as early as March 2000;
b. The U.S. State Department’s International Narcotics Control Strategy Reports from as early as 2002 stating with regard to Mexico that “the illicit drug trade continues to be the principal source of funds laundered through the Mexican financial system. . . . The smuggling of bulk shipments of U.S. currency into Mexico and the movement of the cash back into the United States via couriers, armored vehicles, and wire transfers, remain favored methods for laundering drug proceeds. Mexico’s financial institutions are vulnerable to currency transactions involving international narcotics- trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States. . . . According to U.S. law enforcement officials, Mexico remains one of the most challenging money laundering jurisdictions for the United States.”;
c. The April 2006 Financial Crimes Enforcement Network Advisory concerning bulk cash being smuggled into Mexico and deposited with Mexican financial institutions (discussed in paragraph 22 below);
d. The federal money laundering investigations that became public in 2007-08, involving Casa de Cambio Puebla, a Mexican-based money services business that had accounts at HSBC Mexico, and Sigue, a U.S.-based money services business, that had accounts at HSBC Mexico; and
e. The federal money laundering investigation into Wachovia for its failure to monitor wire transactions originating from the correspondent accounts of certain Mexican money services businesses, known as casas de cambio (“CDCs”), which became public in April 2008.
All of these advisories or events were known to numerous HSBC Bank USA AML officers and business executives at or near the time they occurred.
19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system. From 2006 until May 2009, when HSBC Bank USA raised Mexico’s risk rating to high, over 316,000 transactions worth over $670 b...
> 17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk.
> 18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions. These included:
> 19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category.
In other words, HSBC executives ignored industry guidance of the money laundering risks in Mexican institutions, and continued to rate the country as "standard risk", a rating which did not require monitoring in the CAMP system. They knowingly set the thresholds based on that rating, and they knew about the industry guidance, but the government has absolutely zero evidence that they set the rating with intent to facilitate money laundering.
Point 17: "From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk."
From point 16, CAMP is the "Customer Account Monitoring Program" automated system which monitors wire transfers.
-> Therefore, HSBC Bank USA knowingly took "active steps to disable specific automated countermeasure."
Point 19 "Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally
not reviewed in the CAMP system." (Point 18 establishes that "Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions")
-> Therefore, HSBC willfully disabled specific automated countermeasures.
=> Combine these two "therefore"s, and you'll see that milkshakes's statement is confirmed.
Or look at points 64-66, which establishes that HSBC Bank plc bypassed the automated system which detects funds transfers involving a Sanctioned Entity. They would put a "cautionary note in their SWIFT payment messages" the the messages would "[fall] into what HSBC Europe termed a “repair queue” where HSBC Europe employees manually removed all references to the Sanctioned Entities." HSB know about this since 2000, and their compliance group spoke up about it in 2003.
=> So there were at least two automated systems where "specific automated countermeasures" were "knowingly and willfully" bypassed.
These weren't all that hard to find - I looked for the word "automated".
Whether a country is "high risk" or not is not some well defined standard, it's an entirely subjective opinion. The US Government might have liked to consider Mexico high risk, but they aren't the ones who have to do all the investigative work on every transaction. If you look at the FATF-GATI (international AML org) recommendations, they have their own list of which countries are "high risk" (and Mexico has not been on it lately, as far as I recall).
What the USG is saying here is they think HSBC should have been treating internal HSBC-to-HSBC transfers as high risk and reviewing them all. But this doesn't make much sense for a single company. The lack of it certainly cannot be equated to a deliberate "disabling" of controls.
With respect to the repair queue, this is due to America's insane approach to sanctions - a transfer from country A to country B where there are no sanctions on B in A, that happens to get routed via a US bank, would have sanctions applied, despite that no laws were being violated by either party to the transaction. In order to work around this brain damage EU banks routinely edited ("repaired") wire transfers to avoid hitting the Great Firewall of America, safe in the knowledge that they were not violating any sanctions laws where they lived.
Later, the US decided that jurisdiction was such a bothersome concept they decided that anyone who made a transfer to Iran, anywhere, regardless of local laws at the time, was guilty of money laundering. See also: Standard Charter.
I don't think people here seem to realise the general backstory here. The US Government lies all the time. They routinely get innocent people to plead guilty without any kind of trial by threatening them with absurdly over-harsh penalties. The HSBC case is a classic example of this dynamic in action.
I'm quoting from a statement of facts, so technically the USG isn't the only one saying this. See #2, "HSBC Bank USA and HSBC Holdings hereby agree and stipulate that the following information is true and accurate."
That is, that HSBC agrees that the information provided by the State Department, the April 2006 Financial Crimes Enforcement Network (“FinCEN”) Advisory, the money laundering lawsuits involving two of their customers, etc. from #18, and that this is "evidence of the serious money laundering risks associated with doing business in Mexico, in #19.
You cannot go from "well defined" to "entirely subjective". There are points in between, and to argue otherwise is bad style.
"this doesn't make much sense for a single company" - technically these are different companies, though some are wholly owned by others. That aside, some internal HSBC-to-HSBC transfers were illegal: "From at least 2000 through 2006, HSBC Group knowingly and willfully engaged in conduct and practices outside the United States that caused HSBC Bank USA and other financial institutions located in the United States to process payments in violation of U.S. sanctions."
Now, you're absolutely right that this is an "insane approach to sanctions." (We've switched from Mexico to the Middle East, btw, but that doesn't make a difference.) But you've just argued that communications with HSBC Mexico to HSBC Bank USA were a "single company", so it's a bit disingenuous to say that HSBC Europe is not part of the same company.
There's a nasty problem with jurisdiction, yes, but there are legal ways to resolve it. For one, stop doing business with US banks. But few want to do that, and the SWIFT network (and Snowden's disclosure of documents of how the US is systematically undermining the SWIFT-agreement) make it a gnarly process to completely disentangle from the US.
What you said is different. You wrote "EU banks routinely edited ("repaired") wire transfers to avoid hitting the Great Firewall of America, safe in the knowledge that they were not violating any sanctions laws where they lived." But point #67 says that "HSBC Group Affiliates intentionally hid the practice of amending payments involving Sanctioned Entities from HSBC Bank USA. As a result, during the relevant time period, HSBC Bank USA and other financial institutions in the United States processed hundreds of millions of dollars in transactions involving Sanctioned Entities in violation of U.S. sanctions."
You are right - they didn't break the law where they lived. But according to the statement of facts, you are also wrong - they sent transfers through the "Great Firewall of America", and caused HSBC Bank USA to break US law by not being able to provide the required compliance.
Regarding Standard Chartered, the London-based bank sent the funds through its New York unit, which is how both US and New York laws applied. It's not the case that the US was suing a foreign bank with no US ties.
"The US Government lies all the time. ... They routinely get innocent people to plead guilty without any kind of trial by threatening them with absurdly over-harsh penalties"
While the first is certainly true (see previous, with the US undermining the SWIFT agreement), that doesn't mean it's true all the time, or appropriate for this case. Again, technically this is a statement of facts agreed upon by both sides, and not one-sided accusations from the government.
Which leads to the second half of what I quoted from you. The US could be threatening to shut down HSBC Bank USA should they not comply, and this is the best HSBC could do under the circumstances. The reason I disagree with you here is that HSBC has plenty of legal, political, and economical resources to defend themselves against flagrantly false accusations.
Standard Chartered, for example, doesn't say that they w...
> The worst critiscm you can level here is that a lowly-paid cashier was insufficiently trained to spot potentially dubious sources of cash that were being paid in.
It seems like the frequency with which this was happening would suggest this could not have been hard to detect. Can we really blame this on a single lowly paid cashier? Am i missing something, or does this sound more like multiple cashiers taking comical cash deposits over a very long period?
Why should this lean toward being hard to detect and not willful ignorance and thus willful assistance?
This level of activity is easy to detect if the institution wants to detect it and compile with the law. Chances are the business analyst(s) that did detect it were told to shut up.
Failure to Maintain an Effective Money Laundering Program, Failure to Conduct Due Diligence on Correspondent Bank Accounts Involving Foreign Persons (for the actions involving Mexican cartels and Saudi linked terrorist organisations), violating the International Emergency Economic Powers Act (for knowingly and willfully facilitating prohibited transactions with Iran, Libya, Sudan, and Burma), and violating the Trading With the Enemy Act (for moving money for Cuba).
> Failure to Maintain an Effective Money Laundering Program, Failure to Conduct Due Diligence on Correspondent Bank Accounts Involving Foreign Persons
Yes, exactly, they are being penalised for weak controls as I said, not for wilful complicity in money laundering
> for knowingly and willfully facilitating prohibited transactions with Iran, Libya, Sudan, and Burma.... for moving money for Cuba
well that's got nothing to do with mexican drug money laundering, and whilst that may well have been in contravnention of US law at a moral or ethical level there's nothing (superficially) wrong here; plenty of reasons for legitimate business with these states which a UK company should be able to conduct if it chooses.
"The Department alleges, and HSBC Bank USA admits, that HSBC Bank USA’s conduct, as described herein, violated the BSA. Specifically, HSBC Bank USA violated Title 31, United States Code, Section 5318(h)(1), which makes it a crime to willfully fail to establish and maintain an effective AML program, and Title 31, United States Code, Section 5318(i)(1), which makes it a crime to willfully fail to establish due diligence for foreign correspondent accounts."
yes they are charged with wilfully failing wrt their AML controls. But again so what? This is absoluetly not the same as wilfully assisting mexican drug money laundering. I.e was this wilful failure actually a deliberate attempt to faciltate money laundering, specifically for mexican drug cartels? Or was it a case of laziness, or not wishing to make the necessary investment, or some other complex series of internal events, politics and human error that is often prevalent in an organisation of 300,000 people?
32.
One area in which KYC was particularly poor was HSBC
Mexico’s Cayman Island U.S. dollar accounts.
Mexican law
prohibited most individuals from maintaining U.S. dollar
denominated deposit accounts in Mexico unless they lived near
the U.S.-Mexico border or were a corporation. However, Mexican
law permitted almost any Mexican citizen to maintain offshore
U.S. dollar accounts. These HSBC Mexico accounts were based in
the Cayman Islands, but were essentially offshore in name only,
because HSBC Mexico had no physical presence in the Cayman
Islands and provided the front and back office services for
these accounts at its branches in Mexico. Customers holding
these accounts did all of their banking, including depositing
physical U.S. dollars, at branches in Mexico. Nevertheless, the
accounts were legal under Mexican and Cayman law.
33.
In January 2006, HSBC Mexico conducted an internal audit of
the Cayman Islands U.S. dollar accounts. At that time, there
were only approximately 1,500 such accounts. Over 50 percent of
the audited accounts lacked the proper KYC information, while 15
percent of audited accounts did not contain any KYC
documentation. Over the next two years, nothing was done to
address the KYC issues with these accounts. By 2008, there were
35,000 Cayman Island U.S. dollar accounts. At least 2,200 of
these accounts were designated high risk due to suspicious
activity within the accounts and/or negative information
regarding the account owners.
In July 2008, the total
outstanding balance of these high risk Cayman accounts was
approximately $205 million. Without adequate KYC information,
HSBC Mexico knew very little about who these high risk customers
were or why they had such large amounts of U.S. dollars.
However, even without the benefit of adequate KYC information,
the risks were obvious. Indeed, one HSBC Mexico compliance
officer noted “the massive misuse of [the HSBC Mexico Cayman
Islands U.S. dollar accounts] by organized crime.” One example,
identified by HSBC Group’s Head of Compliance in July 2008,
involved “significant USD [U.S. dollar] remittances being made
by a number of [HSBC Mexico’s Cayman Islands U.S. dollar]
customers to a US company alleged to be involved in the supply
of aircraft to drug cartels.”
Case 1:12-cr-00763-ILG Document 3-3 Filed 12/11/12 Page 12 of 30 PageID #: 65
13
HSBC Mexico Failed to Terminate Suspicious Accounts
34.
When suspicious activity was identified, HSBC Mexico
repeatedly failed to take action to close the accounts. Senior
business executives at HSBC Mexico repeatedly overruled
recommendations from its own AML committee to close accounts
with documented suspicious activity. In July 2007, a senior
compliance officer at HSBC Group told HSBC Mexico’s Chief
Compliance Officer that “[t]he AML committee just can’t keep
rubber-stamping unacceptable risks merely because someone on the
business side writes a nice letter. It needs to take a firmer
stand. It needs some cojones. We have seen this movie before,
and it ends badly.”
35.
Even when HSBC Mexico determined a relationship should be
terminated, it often took years for the account to actually be
closed. In December 2008, there were approximately 675 accounts
pending closure based on suspicions of money laundering
activity. Closure had been approved for 16 of those accounts in
2005, 130 in 2006, 172 in 2007, and 309 in 2008. All 675 of
these accounts remained open into at least 2009, with
transactions being actively conducted through them despite
facing pending closure based on suspicion of money laundering
activity.
HSBC Mexico’s High Volume of U.S. Dollar Exports
36.
Between 2004 and 2007, HSBC Mexico exported over $3 billion
U.S. dollars per year to the United States through Banknotes.
In November 2007, Banco de Mexico, the central bank of Mexico,
expressed concerns about the volume of U.S. dollars exported by
HSBC Mexico back to the United States. Specifically, Banco de
Mexico wanted an explanation as to why HSBC Mexico’s U.S. dollar
exports were significantly larger ...
It hs a lot to do with Mexican drug money laundering in this case, considering it is part of the same indictment, and HSBC is only a UK company in a very loose sense, much of it is in the US and it considers Hong-Kong to be as much of it's base as London, as well it might, given it is a London holding company established by the Hongkong and Shanghai Banking Corporation, hence the initials.
You obviously do not have any domain knowledge about financial regulations nor the banking business at large. Accounting isn't rocket surgery, this level of activity is easy to spot, especially with software.(0) Plus requirements for tracking and reporting large cash deposits of this sort have been on the law books for years. (Not to mention the newer anti-terrorism requirements.)
(0) I've been working in the software side of the financial analysis for over a decade. While not trivial, transaction analysis is very common for various purposes including compliance.
That was one of my proudest moments in my career: I wrote a system to analyze drug-sales-rep activities, one feature being to compare the times they reported they gave samples to doctors to bare-minimum time to travel between those doctor locations. My client found a woman who had been selling the samples to friends with it.
He is simply asking why the overzealous approach the Justice department takes with drug related asset forfeiture was not followed with a large offender.
Lawyer here. Every time I have a new client I have to obtain picture ID, check their share registers etc. Doesn't matter that most of my clients are entrepreneurs, startups or venture funds. Doesn't matter that all their transactions go through banks that have already checked the transactions and the people involved once and that all transactions are ultimately registered in public registers such as the commerce register.
If I were suspecting that a client's transaction was part of some tax evasion scheme, European Union law would require me to report it to the authorities (although it's not clear that these requirements are in themselves lawful).
All this nonsense costs lots of time and money for me and ultimately for my clients.
Meanwhile, it turns out that the scumbags who actually launder money, do it more or less out in the open and they are not even put to jail.
As an individual, all these "know your customer" and "anti-money laundering" laws are a massive drag. When I moved to the UK it was nearly impossible to open a personal account (despite already having secured the right to work from the government--which vetting is quite substantial). The bank wanted utility bills with my residential address, but clearly I needed a bank account to get a home and utilities. It took four visits to the bank branch to get this sorted, each time resulting in more excuses about how they couldn't help because of KYC, AML, and CYA.
If they want to fight money laundering, fine, give me an account with a minimal cash flow limit or some other restrictions. But the modern regulatory regime has infected retail banking to such a degree that normal humans with good jobs can no longer open an account at all. Clearly professional criminals continue to work the system just fine, meanwhile.
How would that have helped me pay my electric bill? I mean sure, if the electric company wanted to support it, OK, but they'd sooner support credit cards or PayPal, don't you think?
I don't like this system when you need a bank account to get a home and utilities. Why can't you use cash? I don't like that the bank wanted your utility bills with your residential address just to create an account for you. What for? They want to control everything. I just don't like that.
I don't need a bank account for utilities in the US. The easiest way to pay is by check my mail or credit card online but if you did not have a bank account you can pay in person or get a money order or maybe even a prepaid debit card?
> You do not need a bank account to pay for utilities in the US. I'm not saying not having one will be very pleasant though.
I came to the conclusion that in the US, if you have everything that people usually have (SSN, bank account, credit card, residential address, phone number, car, drivers license), you will be treated well. Miss just one on list, and people will assume that something is wrong with you, and it probably triggers a few warning signs (e.g. in fraud detection systems).
It may be coming from the fact that homeless and criminal elements usually miss a few on the list, so it was considered an easy signal for such pre-filtering, however, moving from a different country has the same signals, triggering multiple false alarms.
As a non-US person who moved to the Bay area ~2 years ago, I have found found several difficulties with either method you have mentioned:
First, if you have just move there, and don't have a bank account, you don't have checkbook either (there are countries who has no checks at all) - no check by mail.
No utilities accepted credit or debit card, they always wanted to have a proper bank account number from me. Later on they have improved their system and now they offer online bill pay, with an extra "convenience fee" for credit cards. Hurray! (Although I am not sure if the bank account is still a requirement for opening.)
Btw. similar story applies for wireless service: I was required to provide my full employment contract to receive a simple phone number (at that point I had bank account, active employment...). How weird is that?
The 'you don't need a bank account' method in the parent was the money order (there is also usually a way to pay in person, lots utilities do this in concert with convenience and grocery stores).
The wireless thing is because the phone companies treat the account as a credit account. The easy way around it is some prepaid plan (which is possible to fund in cash...). 5 years ago it wasn't such a good option. These days a $50 prepaid plan is at least reasonable, even if it isn't the best option.
The usual postpaid cellular account that most US providers want to sell is indeed a credit account. They're usually paying hundreds up front towards your phone, plus accepting the payments after you've used the service.
For cellular, prepaid seems to solve all of the problems everywhere I've been. I ordered a prepaid SIM card here in the US over the internet with nothing but a credit card number, has full data service and everything. Same thing everywhere else I've travelled in the last year.
Around the beginning of 2013, I took a trip to UAE, Norway, and the Netherlands. In each of those, I was able to get a prepaid SIM card at the airport for cash, with nothing but a passport for ID. All with phone, text, and data service.
I paid my electric in person before years ago before I started paying online and I had a problem with mail delivery and they didn't mail me a bill to mail back. It was simple.
I also knew someone who paid their phone bill in person every month because he was a teenager and didn't have a checking account, but had a cell phone bill.
I ALWAYS pay my electric bill with credit card. No fee.
When I set it up, it required a phone call to turn on, and my name, um, not sure what else. No bank account or anything else. Just a phone call with my name.
As someone who just went through this, an FYI for anyone else in this situation: Lloyds Bank will let you open a current account with just a US passport and a UK work visa, no other docs needed. HSBC has a similar account you can get, but, well, see parent story...
Even Lloyds is hit and miss. A general strategy that seems to work is to gather as much documentation as you can (work contract, flat lease, any government paperwork, something that documents your address and status where you come from, anything with the address you live at, even if it doesn't have your name on it etc) and hit the main street banks from one end, eventually one will bite. Don't worry which one you get, you can easily change it later - all you need is for any bank to send you a statement.
I was actually at my 3rd bank trying to open an account, but without any other documentation than my passport & visa. I think it was Halifax. The guy I was speaking went in back for a bit, and per usual said "I'm sorry but without proof of address we can't open an account for you." When I started lamenting my sense of defeat to him about UK banks, he said "okay look, I'm not supposed to say this, but off the record, if you go down the street to Lloyds, they have a special process for US citizens where you can just open an account with a passport." Sure enough I went down the road, and after making yet another appointment (an appointment to open a bank account? really Britain…), they confirmed that indeed they do open accounts for US citizens with just a passport.
So I feel pretty confident in recommending Lloyds in this case.
Lloyds is probably better than average since at least at some point they had a formal process for getting an account without proof of address. But my wife was asked for proof of address there (which she was able to provide) and my friend failed to get an account , but got one at Halifax. I have a few more secondhand anecdotes about other people who was turned away at Lloyds, but taken on at Barclay or HSBC.
I think the case is that it's a rather non-deterministic process and the outcome depends a lot on exactly which manager you talk to and what their mood is like that day.
You need to prove where you lived for the last 3 years. Oh, you don't have paper bills? Your country is very progressive, too bad. Moved around? Well, you need a UK address or at least a rental agreement.
Also showing your current bank account statements will help.
But we'd rather refuse to open this simple checking account just because (...we're busy laundering money :-)...).
And no one gives you the exact goddamn reason or a simple solution.
Documents produced on a home printer are meaningless for identity or address verification. Anyone can open the PDF in inkscape and make it say any name, address or date they like.
Isn't it more fraudulent to give the bank home-made documents than to give them nothing? At least when you give then nothing you're being honest about what you're giving them.
Yeah, but that modification is forgery and fraud. In all honesty, I could probably replicate a paper bank statement by doing the same thing. The crime is in the manipulation.
As for me, I continue to print out bank statements on university printers and have everyone from embassies to landlords accept them.
No one I've met believes that going to your bank's website and printing out the PDF they give you is fraudulent.
I was on the phone to British Gas complaining that I suddenly stopped receiving paper statements. The agent on the phone got really helpful all of a sudden when I told him I needed the paper bills for proof of identity.
Turns out he had just gone through the whole debacle himself. He had to show a bank statement, but he only has an online account. Went to the bank to get a statement printed and stamped, and whoever he went to turn it in to still refused it because it hadn't been mailed.
Personally, I don't want to give the BA any easy reason to reject my visa applications, I get all the mailed proof of address I can.
Wow, I guess you just proved all those people saying they couldn't get such papers accepted are clearly lying because you've never had a problem.
The fact that they are so easily manipulated is the reason they are most often not accepted as proof of identification, regardless of criminal law. It could be totally legal and it would be in the best interests of banks/businesses to not accept them due to possible liabilities.
Used to work in retail, sold credit obo Barclays bank - we were told not to accept printed copies of bank statements but I heard stories of people asking customer to log into online banking live.
Chase in the US rejected my recently expired US passport as secondary ID, but accepts my non-expired Indiana vehicle registration, a document laser-printed on ordinary copy paper at the BMV with no graphical elements other than form boxes that'd be trivial to counterfeit. So it's probably safe to say that "difficulty to counterfeit" is not a criterion for secondary ID at Chase (nor, apparently, is mismatched mailing address, because my vehicle isn't registered at the address on my primary ID).
The UK immigration authority does not recognize printed online statements. I had to print 100 pages from my bank's website, take the paper to my bank branch, and have each page stamped by the bank to make it "original." This is a true story.
Painful. I suppose online statements are too easy to counterfeit? It's a shame the bank couldn't provide authenticated documents to you as a automated service.
You don't really need a bank account to rent a home. In fact, at my first place I've only paid rent with cash or by debit card for almost one year, and it was an agency. Private landlords tend to be even more flexible, basically the ones I've had only cared about being paid on time, not how.
Just a nitpick: there is really no such thing as "EU law". EU directives bind nations and force them to implement them in the local context, but any law you are bound to is the local law.
(The distinction is important in the current political climate, since the excuse "it's EU law" is abused by politicians to steamroll the local electorate into believing they have no say in the matter, and pretend they can not be challenged locally. That's how we got screwed with for instance data retention "laws" that are blatantly unconstitutional in several EU member states.)
(a) There are "EU Regulation" which are actual laws. But "Directives" are more common.
(b) Regardless, an EU Directive is essentially an "EU law". It's a distinction without much of a difference.
(c) Some countries' constitutions say "All EU law/directives/whatever are binding and constitutional, unless the country leaves the EU". The Irish constitution has this sort of clause.
(d) EU law/directives/regulation is created by the EU. Which we vote on. European Parliament elections are coming up in 2014. If you think you have no say in the EU, vote in the EP elections and vote in your national elections. Those 2 directly elected bodies control EU law.
EU law is a term used for all regulation from the EU and sometimes for EU court rulings as well. Most EU legislation is issued as "directives" (such as the EU directive on money laundering), which are to be implemented by the member states in their local laws, or "regulations", which apply directly without any need for national implementation. Now, this distinction is blurred by the fact that directives also have direct effects in certain situations (so that the provisions of the directive can be invoked even if they are not implementer), for example when a member state fails to implement it on time or correctly.
So you can't have a client who's illegally in the country, like asylum seekers, or any ID will do fine? I always thought defending someone in court was like being a doctor, you should help them no matter what.
Lawyers are not priests, nor doctors. You are misunderstanding what it means. Attorney-client privilege (in theory) only lasts up to the point where the attorney is sure that something is illegal. If that line is crossed, there is a theoretical reporting requirement (that is not specific to lawyers).
A lawyer most certainly does not have the duty to hide the crimes or confessions of his client(s). Not in the EU, not in the US (nor does a priest or doctor, but they can legally choose to do so in most jurisdictions. Anyone who is not a priest or doctor cannot make this choice : you have to report. In practice I've never seen anyone get sued for not reporting anything outside of financials).
Now as for the interpretation of this ... You have the US way (it's not illegal until a court says it is ... there's something to be said for that), and the EU way. The problem in the EU is that a lot of tax collection agencies are less than subtle and have legal rights that mean you simply don't want to even appear to cross them. In Western Europe, a tax agent has the right to shut down any business without specifying a reason, lock any account without specifying a reason, and take anything from any premise without a reason (or lock it down).
Does this violate the relevant constitutions ? Nobody's successfully challenged it as far as I know. (Yet another reason EU criticism of NSA data collection is ridiculously hypocritical).
That doesn't change the basic principle though. If you go to a lawyer saying "I killed this guy, get me out of it", he may go to the police and report you. While the lawyer is unlikely to get sued for not warning the police, when asked a lawyer MUST testify that this has indeed happened (same thing applies to anyone else for that matter).
Ehm, you're being pretty vague here. As far as I can tell, none of what you're saying applies to Belgium, a Western European country if any is, and our tax collection agency is not even close to the IRS when it comes to bullying people and businesses. And the European Union really has very little say over tax collection practices, so I imagine it's different everywhere. So what countries and what practices are you talking about exactly?
Actually the "rights" I alluded to above are the ones from Belgian law, although I do know the Dutch IRS has similar rights (the Dutch one also regularly detains people without (delcared) cause).
If attorney-client privilege works as you've described it, it doesn't make any sense. The prosecution could summon the attorney to testify and divulge all the information he has.
Attorney-client-privilege is an English/American legal term with a lot of meanings to it shaped by the courts.
In the EU, different member states have rules regarding confidentiality between lawyers and clients. Usually, the right to confidentiality is not absolute (the lawyer may have an obligation to speak in certain situations).
For a while lawyers hoped that something like attorney-client-privilege could be interpreted into the European Convention for the Protection of Human Rights
and Fundamental Freedoms. With the ruling above this seems less likely.
I'm asking because I work with lawyers in the EU from time to time and I've never had to provide ID etc. It was always a telephone call or email plus sometimes a retainer.
The regulatory environment HSBC is operating in is more or less the regulatory environment you're complaining about. The law requires HSBC to monitor billions of wire transfers, to breathe down the neck of suspicious persons using their banks, and monitor all of its branches for criminal activity, and they basically did that--but not as much as the US demanded. You don't send an executive to jail because a guy several layers down did something wrong, and popular outrage feels the executive should, somehow, be personally and criminally responsible for that.
The idea that HSBC executives are guilty of... violating the article author's feelings about how anti-drug law should work, or something... is why you don't get your financial news from an unbalanced liar in Rolling Stone magazine. But even Taibbi can't seem to identify what precisely the executives are guilty of, an important prerequisite to prosecution in a nation governed by the rule of law.
As for the regulations, they are the reason why you can't open an account or move large amounts of money without giving the bank enough information to know a substantial portion of your entire financial history, and giving the bank permission to freeze your accounts approximately whenever they feel like it or whenever the government demands. You can think this is a good thing or a bad thing, but since you, Mr. Lawyer, complain about you having to burden yourself with the responsibility of knowing your client, surely you feel it's unfair that banks have to do the same thing? Not to mention the privacy implications.
And the law makes the executives responsible for implementation of this, which they clearly did not do effectively. The executives are not guilty of an anti-drug law, but a money laundering law, and the liability is pretty clear. The current maximum sentence is 5 years, although the "Holding Individuals Accountable and Deterring Money Laundering Act" is trying to raise this to 20. All these types of regulation about money laundering and bribery have executive liability.
Please point me to the law that the executives broke that would send them to jail. Cross-reference it with the government's charges.
If you read the DOJ's side of things, HSBC is guilty of things like "we said Mexico is high-risk, HSBC disagreed and so failed to automatically monitor a bunch of transactions," in more legalistic language.
How about basic decency? You have to admit that there is a parallel here with many "everyday" drug cases, and that the punishment of ordinary people in parallel situations is drastically disproportionate to the punishment of HSBC.
It's extremely hard to send drug kingpins to jail, and these are people who are actually breaking the law.
I'm sure, however, that the US government can try to prosecute mid-level HSBC managers and maybe some random bank tellers in Jersey and Mexico and wherever. Somehow I doubt this is what the article author actually wants to happen.
"I'm sure, however, that the US government can try to prosecute mid-level HSBC managers and maybe some random bank tellers in Jersey and Mexico and wherever."
They are not even doing that. And given your view that the executives should not get done because of mid level managers being responsible, what do you think of the fact that they are not being held to account either? Or do you honestly believe that this money was laundered through HSBC with nobody at HSBC helping?
If you're a bank, your services will be used to launder money. It's guaranteed to happen. All you can do is implement controls to keep that activity below a certain threshold. And banks reasonably want to implement as few controls as they can get away with while complying with the law, because it costs them money to do so. Failure to implement sufficient controls for compliance is not tantamount to an intent to assist money laundering.
There's absolutely no parallel here to the situation of ordinary people. If you see that Joe Schmoe's bank account was used to launder money from a drug cartel, you can very reasonably infer that he intended to assist that cartel. There's no reasonable explanation that involves trying to save money or hassle on regulatory compliance issues. Those sorts of transactions don't just accidentally or incidentally happen to ordinary people.
New York State Penal Law Charge
62.
DANY alleges, and HSBC Holdings admits, that its conduct,
as described herein, violated New York State Penal Law Sections
175.05 and 175.10, which make it a crime to, “with intent to
defraud, . . . (i) make[ ] or cause[ ] a false entry in the
business records of an enterprise [defined as any company or
corporation] . . . or (iv) prevent[ ] the making of a true entry
or cause the omission thereof in the business records of an
enterprise.” It is a felony under Section 175.10 of the New
York State Penal Law if a violation under Section 175.05 is
committed and the
person or entity’s “intent to defraud includes
an intent to commit another crime or to aid or conceal the
commission thereof.”
The Bank Secrecy act encapsulates hundreds of pages of law and regulations. Which part are you talking about?
You can't just link a law and say "it says somewhere here someone can go to prison for some reason, so I'm sure that bank executives should go to prison." The Wikipedia article's blurb about prison does not seem to cover HSBC's conduct, but it's also hopelessly vague.
The Bank Secrecy Act carries with it an enormous amount of different regulations and different laws and different penalties. The exact part is what you need to make your "point". If you can't produce it, no point has been made.
The DOJ hasn't bothered to produce any reason to throw executives in jail, and I bet you can't either. Blithe self-righteousness is not a reason. A vague reference to a multi-hundred-page set of laws and regulations is not a reason.
The DOJ hasn't bothered to produce any reason to throw executives in jail
New York State Penal Law Sections 175.05 and 175.10
edit - 175.10, which HSBC have admitted guilt to, is a class E felony in NY, which apparently has sentencing guidelines of up to four years in prison with a minimum of one year.
I am busy right now coding to go through in detail, but here [1] is an example of someone who was imprisoned under the BSA for "conspiring to fail to file currency transaction reports and failing to have effective AML and compliance programs", which certainly applies to HSBC.
No, HSBC didn’t disagree. They initially agreed, then /executives/ at the bank said “this will reduce profitability, so we need to change our position”.
They are very much at fault.
We don’t need to cross-reference anything. You should be disproving things. Why? Because HSBCadmitted guilt and liability.
Because you send people to jail for committing crimes, actually doing things that violate the law. Simply being employed by a company to manage some lawbreaker isn't a crime.
And if you'd like to propose making it a crime, I'd encourage you to first think about how exactly it could be twisted - how to separate the really-morally-responsible the scapegoats, in advance, with nothing but legal language.
You can go to prison for being an accessory if it can be shown that you were consciously aware that the crime was going on but did not stop/report it, or that you not being consciously aware is due to gross negligence on your part.
Of course the outrage comes from the fact that corporate structures offer so many layers of plausible deniability. At the end of the day, we would have to be fools to believe that billions in money laundering or price fixing are happening at these banks orchestrated, as the executives would have us believe, by a small group of malevolent peons expertly covering their tracks. It's just common sense that lots of people know what's going on and turn a blind eye because it's good for business and there's virtually no chance it'll actually get pinned on them.
I think you're missing the point. The issue here is that we have two prosecution regimes at work: one for the banks which works by more or less the rules you propose, and one for "everyone else", which very much doesn't. Your idea of only prosecuting bank employees with direct connection to the crimes seems like cold comfort to all the people threatened with arrest, in prison (or hell, even shot) because of the activities of their husbands and roommates.
Strangely, libertarian hacker types tend not to come to their defense as quickly as they do bank executives.
> Well, ok, then what do you do with all the money sitting in deposits in the bank?
There's a couple ways you could handle a "corporate death sentence" applied to a bank:
1. You could treat it as if the bank had failed completely -- all assets are forfeited, but customers receive refunds on insured (e.g., covered by FDIC) accounts only up to the amount insured. This would create some risk for large depositors, which could be considered bad, or could be considered good as it would encourage large depositors to take an active interest in how banks are run which would create pressure on behavior which would reduce the likelihood of needing to impose sanctions.
2. You could treat it as a facilitated sale of the corporation itself -- either in one unit or split into pieces with different buyers -- with any proceeds going to government rather than the shareholders.
> In America a company is considered an individual/has a social security number correct?
No, in America (as everywhere else corporations exist, since this is the very definition of a corporation) a corporation is considered a legal person (that is, an entity subject to legal process in its own identity). In America, corporations have Tax ID numbers, which serve (for tax purposes, though not for Social Security itself) a purpose similar to Social Security numbers.
I think it's to be expected that governments that live off taxes force companies, that receive large cash deposits or whose business it is to receive, store or transfer money, to identify those individuals and businesses whose money they receive, store or transfer.
I don't receive any cash payments and I don't make any cash payments in my business. I am not a financial institution. This year, the value of the transactions that I participated in was probably around 100 million euro or so, and a fraction of a percent of this went through my account or ended up on my account, and all of it came from and went to banks. Not a cent was received in cash. Not a cent was paid out in cash. Now, HSBC and other banks probably have billions flowing through their system every second and in the order of millions received in cash or paid out in cash every second. I think it's natural to burden a few thousand banks with these rules, and not millions of small businesses.
Banks don't have the same access to your clients that you do. Their fraud monitors are giant machine-learning racks of computers.
If one were to adopt the position that it is the responsibility of business to prevent fraud, well, you have a unique ability to do that that no other institution has. This is why I think your post is hypocrisy. Banks aren't lawyers, they don't know your clients like you do, and if you adopt the principle that "people should be responsible for the actions of their customers", you're going to have a significant amount of responsibility that nobody else can handle.
Lawyers should be responsible to their clients, not serve as an extra layer of tax informants. Governments already have hundreds of thousands in their employ. And please spare your hypocracy remarks for someone you know.
Lawyers are partly agents of the government. The alternative would be to make private lawyering illegal and to require all lawyer-type work to be done at goverenment offices.
Lawyers should be responsible to their clients, not serve as an extra layer of tax informants.
I was under the impression this is how it worked eg. that lawyers' only responsibility are to their client. Otherwise you would get some kind of weird conflict of interest in every case.
>> You don't send an executive to jail because a guy several layers down did something wrong
First , they are responsible as managers like others said.
But we're talking about serious allegations of supporting terrorism. For a common citizen , any strong link to terrorism means some extra legal horrible torture . But for HSBC's managers , even repeated offenses and warnings mean nothing.
> and monitor all of its branches for criminal activity, and they basically did that--but not as much as the US demanded
I'm not convinced that it wasn't completely obvious. The Mexico unit shipped $7 Billion to the US unit. Why did Breuer call it "stunning failures of oversight"?
> You don't send an executive to jail because a guy several layers down did something wrong
So why are the bonuses of those execs being cut if they are not to blame? Again, why did Breuer call it "stunning failures of oversight"?
I'm also not convinced they won't use this as a horrible excuse to unnecessarily increase monitoring, while the entire thing was plainly visible under an existing system. I would like cash to stay private, can i really not have that without something like this being invisible?
" You don't send an executive to jail because a guy several layers down did something wrong, and popular outrage feels the executive should, somehow, be personally and criminally responsible for that."
1. Just to be clear, they didn't put the anti money laundering people who were literally in charge of verifying compliance with these laws in jail either, even though they knew they were laundering money for the drug cartels. The government alleged, and HSBC never denied, that they had actual knowledge of what the money was being used for. It's not a case of "oh, well, i had no idea bob at the teller window was doing this".
This isn't "the guys several layers down did something wrong"
This is "We knew were laundering money for the drug cartels. We intentionally flouted the law (government's words) to keep it that way."
2. It's not "wrong", it's criminal. What HSBC did is criminal. They were charged criminally. This is a deferred prosecution agreement. They knew they were laundering money for drug cartels. "But even Taibbi can't seem to identify what precisely the executives are guilty of, an important prerequisite to prosecution in a nation governed by the rule of law." This isn't even close to right. You should try reading the charging documents that led to this settlement. The prosecutors make very clear what they are guilty of, and lay out a case that makes clear the executives knew exactly what was going on. They even created fake banking products to get around the law, too.
The entire setup was a sham from the start. The reason HSBC didn't deny everything is because publicly being fined and saying nothing about it was the condition on avoiding prosecution. Remember, the PATRIOT Act can give bankers 20 year jail sentences even if they did not know what was happening. Jailing innocent people from crimes committed by basically random other people is absurd and yet that is what Congress has put in place.
If your choice, as a banker, was to piss off a government hell-bent on making you a scapegoat and risk going in front of a jury of poor people who hate bankers, charged of violating a law it's impossible not to violate, and which carries a 20 year jail sentence, you would agree to a deal as well.
The US allegations were ridiculous anyway. They claimed HSBC "knew" there was money laundering taking place merely because money was moving from Mexico to America. I'm sure HSBC execs, having read newspapers and watched TV, were quite confident there was drug money in that stream. This is quite different to knowing precise account numbers of drug cartels with a high degree of certainty. I don't recall the latter being alleged, however.
35. Even when HSBC Mexico determined a relationship should be terminated, it often took years for the account to actually be closed. In December 2008, there were approximately 675 accounts pending closure based on suspicions of money laundering activity. Closure had been approved for 16 of those accounts in 2005, 130 in 2006, 172 in 2007, and 309 in 2008. All 675 of these accounts remained open into at least 2009, with transactions being actively conducted through them despite facing pending closure based on suspicion of money laundering activity.
36. Between 2004 and 2007, HSBC Mexico exported over $3 billion U.S. dollars per year to the United States through Banknotes. In November 2007, Banco de Mexico, the central bank of Mexico, expressed concerns about the volume of U.S. dollars exported by HSBC Mexico back to the United States. Specifically, Banco de Mexico wanted an explanation as to why HSBC Mexico’s U.S. dollar exports were significantly larger than its market share would suggest.
37. In February 2008, HSBC Mexico’s CEO met with the head of the CNBV and the head of Mexico’s financial intelligence unit, Unidad de Inteligencia Financiera (“UIF”). Again, the volume of HSBC Mexico’s U.S. dollar exports was raised as a concern. Specifically, HSBC Mexico’s CEO was told that law enforcement in Mexico and the United States were seriously concerned that the U.S. dollars being deposited at HSBC Mexico might represent drug trafficking proceeds. HSBC Mexico’s CEO was also told that Mexican law enforcement possessed a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money.
"All this nonsense costs lots of time and money for me and ultimately for my clients."
Perhaps you could clarify how it costs both your clients money and you money as well?
I'm assuming you are billing your clients for the work that is necessarily in one way or another for having to do this. Or it's part of your overhead and you base your rates in part on your overhead.
For sure it's a pain but there are many things that need to be done in order to be in business. They are necessary evils like filing tax returns or collecting social security numbers and making employees fill out various government required employment forms. It's called "the cost of doing business". Little minor bs that isn't anywhere close to going away.
All the HSBC settlement proves is that prosecutors like cases where they have IRC transcripts of someone ordering hits. That's why drug cases are so popular compared to white collar cases. Its easy to prove that some guy had a ton of cocaine and that's all the law requires. Much harder to prove that someone intended to facilitate money laundering (especially in a county where its easy to get caught up in that accidentally).
It is simply the nature of white collar crimes, where the illegality of conduct usually depends on what the person was thinking, that it will be prosecuted less strongly than other kinds of crimes. This is a feature, not a bug.
Also, I love how people on here seem to think that only terrorists and cyberlibertarian money launderers deserve due process. E.g. Perlpimps comment that we should infer purely from circumstances intent that is either criminally negligent or affirmatively corrupt.
I think you missed the part where they chose not to indict HSBC and the reasons for doing so. There doesn't seem to be much ambiguity about the actual money-laundering. The linked NY Times post has more info.
So what? Convicting a corporation on federal charges can have an impact grossly disproportionate to the charge. The conviction of Arthur Andersen destroyed a $10 billion/year company, put tens of thousands of people out of work, cost the economy of Chicago immensely, all over the actions of a handful of partners at the firm. There are situations where convicting a corporation is appropriate, but in the HSBC case there was very little evidence that anyone actually intended to do anything wrong. The settlement was entirely the appropriate outcome in this case.
I don't understand your position on HSBC's guilt. There is plenty of evidence that they have intentionally weakened their AML program. When they rated Mexico with the lowest AML risk in contradiction to every indicator in the industry, they knew of the consequences. They knew it would facilitate money laundering (by definition), in one of the hottest drug trafficking region. Does it matter so much that their ultimate goal was to make money rather than launder money? Of course money laundering was not an end in itself. That's probably why "willfully fail to establish and maintain an effective AML program" was made a crime: to give legislation some teeth in precisely a case like this, no?
The FATF (Financial Action Task Force) co-ordinates AML regulations around the world. Note that Mexico is not on the list. Nor has it been there for a long time.
What's more, HSBC classified Mexico as standard risk but this did not override account level risk markers, it just meant they were not attempting to manually investigate every single wire transfer in or out of Mexico, an impossibly vast job. Wire traffic between US and Mexico is vastly larger than between, say, US and Algeria.
The absence of Mexico from the FATF blacklist simply means that Mexico makes a good effort at implementing the FATF recommendations. Which makes sense since Mexico is a FATF member (I don't think there is a single FATF member in the FATF list of high-risk and non cooperative countries). It doesn't account for the high risk of money laundering associated with the social context of drug trafficking (this was also the government's point I think).
For what it's worth, the 2009 IMF report on Mexico's FATF compliance[1] identifies a lot of issues regarding Mexico's AML process (see the ratings table starting at page 311).
Reading the Statement of Facts, I personally find the evidence compelling that there was a lot of blind eye turning at HSBC to say the least. Just one example:
When suspicious activity was identified, HSBC Mexico
repeatedly failed to take action to close the accounts. Senior business executives at HSBC Mexico repeatedly overruled recommendations from its own AML committee to close accounts with documented suspicious activity. In July 2007, a senior compliance officer at HSBC Group told HSBC Mexico’s Chief Compliance Officer that “[t]he AML committee just can’t keep rubber-stamping unacceptable risks merely because someone on the business side writes a nice letter. It needs to take a firmer stand. It needs some cojones. We have seen this movie before, and it ends badly.”
(BTW I don't "keep saying this". It was my first comment on the topic. You probably confused me with milkshakes or dalke.)
If you deliberately disable monitoring of dubious transactions in a country in the throes of an actual drug war, it's difficult to see how this is mere ignorance or gross incompetence. Likewise, if an experienced programmer was found to have disabled deliberately HTTPS upon login on a large website and profited financially from the breach, it would be difficult to see that as anything else than wilful. Especially if it was not the programmer's first brush with the law.
How can it be constitutional to extract your DNA, and then make you pay for it? That doesn't make any sense to me. What's next? Making you pay for your own jail time? If they want to make you do all of that, then they should pay for it.
I wonder: While Tabibi says that's just several weeks worth to HSBC, then what would have been an appropriate amount without threatening the financial system?
I see the logic of how unfair it is for no jail time for anyone at HSBC. Perhaps this is something that is highly unlikely or too steep a battle to fight. Maybe then, at least the settlement could have been more than the "record $1.92 billion settlement".
Banks have proven time and time again that fines are not going to stop them from doing illegal activity. If you throw a few execs in jail, well, people will start to think more about their future actions. The current system of bonuses for performance and minimal chance of a US investigation that leads to a fine, at most, encourage illegal/shady behavior. Throw in the risk of jail time and people will think twice before doing anything might be illegal. You'd also get a lot more whistleblowers trying to cover their asses.
Ya, I just am not familiar enough with the issue to know if 1.92 billion was appropriate or not relative to the damage of any other wide scale settlement.
How about the $200 billion tobacco settlement as a baseline? Were HSBC's damages 1% what was settled in the tobacco case in 1998? Disclaimer: I'm an outsider to the legal profession, so pardon me if it's a silly comparison.
They turned off the money laundering alarm systems for over 200 trillion (yes tr-illion) - much of it from mexico.
Come on - prosecute this one.
I remember an article about the new form of journalism at the end of the Rockefeller/Morgan era, where detailed and specific highlighting of the outrageous crimes brought about notable social change.
Perhaps this is the first story of the new wave - I would like to think so because only corrupt banking can get money cleaned for criminals - and cryptolocker is just the first of a new wave of crime.
Did you see that it's from 2012? (unfortunately only really visible in "20121213" in the URL, and the dates on his links) I guess it's a slow wave, if any.
aaargh - I thought this was a news site. I had simply assumed that this was yet another and different criminal activity by a bank. Whereas I had already gotten upset by this story a year ago.
Here is the article I believe you're referring to. Really enjoyed it as well. The slant of Rolling Stone's "journalism" makes me worry though. Any article where while reading you get progressively more angry is most likely heavily one-sided. That's why you come to the comments section, to bring yourself back down to earth and realize these issues are complex and multifaceted and the answers (prosecute all!) aren't always that cut and dry. Would love to see a more balanced account of this HSBC scandal.
I think this is really where the current issue with the extremely wealthy lies.
I don't have an issue with anyone accumulating wealth, but I do take issue with people who are able to use that wealth to circumvent the law and increase their wealth through illegal means.
Maybe I should have become a banker instead of a software developer.
I think the issue is, in order to actually prosecute specific individuals criminally, the government would have had to prove that they indeed intended to launder money, as opposed to say make it easier for Mexican factories to pay suppliers in the US. Criminal burden of proof is much higher than the one required for a civil prosecution. The fact that the bank very openly subverted the money laundering controls probably makes it HARDER to prosecute, not easier since they probably also had legal language describing all the legitimate reasons for doing so, etc.
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[ 3.9 ms ] story [ 253 ms ] threadBut the rich escaping with a slap on the wrist where the poor gets jail time is nothing new, if I was any more lefty I'd say it's paving the way for a hardcore revolution, but then it's been going on for decades, people are just too apathetic...
And revolutions usually take many generations to get to a boil. In these days given information flows a lot faster, it's going to take two or three instead of ten or fifteen generations.
It's just like scientific ideas, they become mainstream when the status quo defenders who are mistaken die.
No revolution is coming, at least as long as the people are entertained, and not too hungry.
You're part of the apathy. Not a great way to bring change.
Nevertheless, as the rest of the world shows, there are people interested in change (see Kiev, Egypt, among others)
Heck, even the Occupy movement showed there are people in the US itself worried about change.
I wouldn't discount a massive revolution in our lifetime. It depends on how hard and how far politicians and oligarchs push, and on the other hand, on the appearance of appropriate leaders.
As long as they give scraps of the pie to enough people, nothing will happen. Lets get realistic, 99% of HN lectorate benefits from the status quo, me and likely you included...
Sadly, many massive crimes against humanity go unpunished when commited by corporations. Compare the crimes of HSBC to the crimes of Pfizer. http://www.fbi.gov/boston/press-releases/2009/bs091509b.htm http://www.sfgate.com/business/article/Huge-penalty-in-drug-...
The laws of the USA suggest that corporations that are convicted of two felonies are subject to a corporate death penalty, but given the continued non-punishment of perniciously malicious companies like HSBC and Pfizer, don't expect the US Department of Justice to act anytime soon.
And/or first world countries.
http://en.wikipedia.org/wiki/Diminishing_returns
(E.g I don't care if some strict leader in an African village behaves badly to his people and gets away with it.
Compared to what large powers do and get away with, with their world wars, invasions, opression, colonialism, etc, it's neglighible).
For example, the reason opium dens were outlawed in San Francisco is because they got very popular with the chinese laborers and that upset the white establishment. So, the white lawmakers got together and made a campaign about "chinese men on drugs are stealing your white women." Soon after, SF outlawed opium dens to punish the chinese workers for, well, the falsely manufactured epidemic of all upper class white women falling in love with chinese railroad workers and leaving their white husbands in shame.
The ruling class has a mind of continuance and more restriction, not clearing out the cruft from long ago.
More at http://en.wikipedia.org/wiki/Opium#Prohibition_and_conflict_... and http://en.wikipedia.org/wiki/Opium_Wars and http://www.pbs.org/wgbh/pages/frontline/shows/heroin/etc/his...
The history of drug prohibition is a process of cracking down on one minority group after another in order to get votes. Opium: chinks. Marijuana: niggers. LSD: smelly hippy sluts. Methamphetamine: poor white trash/wiggers. Visible booze bottles: bums.
There are a lot of people who benefit from the war on drugs, who also share responsibility for perpetuating it.
1. Doing illegal drugs: Not Ok, jail. 2. Making illegal drugs: Not ok, jail. 3. Selling illegal drugs: Not Ok, jail. 4. Making tons of money off of people who do sell illegal drugs: Partially Ok (just pay a small fine).
One can argue that the people were removed from knowing exact nature of all transactions but trust me this won't float - you either recklessly incompetent or insidiously corrupt and involved in what is happening, especially when it happens on this scale.
regardless, war on drugs is more or less like prohibition - way to control the masses without loosing face in front of elderly conservative public - who votes.
Even if I kinda like the idea of Silk Road, I can't help but think DPR will get what he deserved...
One hand washes the other.
While some of the more conservative people out there might disagree with people taking drugs, the fact remains that people do want to get high and thus those people will always find way to do so. To me, it makes more sense not to turn those people into outlaws and instead concentrate your efforts on tackling those who turn to drugs for non-recreational reasons (eg resolving addiction and/or peoples dependency on stimulants for escapism. Those individuals usually have other real life issues and -wrongly- turn to drugs as their "fix").
This will never happen though because drugs are given such a bad connotation in the press as the roots of all evil. Not all drugs are equal; whose which are proven to be relatively harmless compared to tobacco or alcohol are given the ridiculous label of "gateway drugs" - as if anyone who smokes two puff of a joint will automatically end up on the streets shooting heroin. If we want people off the harder drugs then we have to teach kids that not all drugs are equally bad - and to do this we need governments to send a saner political message about their stance on drugs.
From a personal perspective, I've done a few "magic mushrooms" at festivals in my younger years. They made me a little giddy but at no point did I rape, steal nor murder. In fact I was more pleasant company than when I've been drinking (and I'm not a rude drunk by any means). Yet since then, the UK government has made magic mushrooms illegal. It's just absurd to think that my previous actions, which were entirely harmless at the time, are now illegal. And when kids experiment (as many kids often do) they too will learn that government legislation is broken towards "softer" drugs. Which will make then re-evaluate their opinion about their governments stance on all drugs. So the government are really just wasting their own time and our public money by continuing on this charade that all recreational chemicals are evil.
The most hypocritical thing of all though, is I bet a great many of those in power have smoked weed at some point when they were teenagers / young adults (as we saw in the UK with the amusing yet frustrating confessions a few years back where several politicians came forward and admitted to "smoking but not inhaling". sigh
UK != US. So it stands to reason that I wasn't talking about Clinton specifically. But it's amusing to see the same stories happening on both sides of the pond.
If we want that. That is not really the goal. The goals of drug prohibition today are:
1. Creating favorable markets for the pharmaceutical industry
2. Expanding the size and power of the police
3. Artificially inflating the market for paramilitary police gear
4. Protecting the market for alcohol and tobacco
5. Attacking certain minority groups
6. Expanding the prison industry's profits
No amount of logic or reasoned argument can override the amounts of money and political pressure at work here.
The gradual erosion of prohibition through popular referenda in the states argues against the truth of this claim.
Everything starts somewhere. If the factors that were posited as insurmountable in the defense of drug prohibition really were, we wouldn't see legal progress against prohibition at all. The fact is that is that those factors, even if they are accurately described as the motivations behind legal prohibition, are demonstrably not insurmountable.
I propose that twenty thousand people ought to be enough for any company. Having more, smaller firms will improve the job market for individuals, reduce the burden of mega-powerful interests in government acting against the population as a whole, and provide more genuine opportunities for real leadership to a greater number of people.
A gradual phase-in could be used, say max 500K employees by 2020, 200K by 2025, 100K by 2030, 50K by 2035, and 20K by 2040. And no funny business: one person cannot have a controlling interest in companies whose employee counts exceed the limit in aggregate.
Walmart may drive out mom and pop stores, but there are plenty of regional chains still around.
Perhaps Wal-mart is not a good example. My point is that when a 25000 employee company in any other industry fails (size of Lehman Brothers when it failed), the ripple is much smaller, and therefore, capping the number of employees is not a good idea. I do agree, however, that TBTF is bad. No entity should be TBTF and hold the country hostage.
Wal-Mart is TBTF, the question is whether there's anything the government could do that would cause it to catastrophically fail (and thus whether or not there's a moral hazard involved). In the case of Anderson, the government indictment killed the firm because no one wanted to be audited by a firm indicted for fraud. In the case of banks, there are automatic sanctions that go into place upon a criminal conviction that would constrict the ability of the bank to access capital markets, and thus could conceivably lead to rapid collapse. It's hard to see anything similar that could be done to Wal-Mart. If convicted of a crime most likely it would just pay whatever the fine was and keep doing business.
On the other hand, take a business like Boeing -- that's both TBTF, largely because of it's giant workforce, and vulnerable to rapid collapse if government sanctions, such as those stemming from criminal conviction, made it ineligible for US government contracts (such contracts make up around 40% of revenue).
As for the grandparent's proposal rather than a hard cap, I'd prefer to see some sort of feedback mechanism to counteract natural economy of scale effects. Perhaps some sort of escalating tax rate (per employee maybe or some combination of employee and revenue). For industries like banking with acute dangers something more tailored might be in order -- taking into account balance sheet size, nominal outstanding transactions, and counterparty centrality.
And Siemens was able to use their ever-expanding reach to be able to let the US government slip malicious code into unknown numbers of scientific equipment to jump the airgap into Iranian nuclear facilities. But that's just the stories we know.
Other commentators have pointed out that size is difficult to measure. This is true. To these cautions I would add the ever-pertinent one that legislation breeds corruption. Too many people already make a living by exploiting tax loopholes & legislative weaknesses (Private Equity, I am looking at you).
Placing these practical concerns to one side, I think I would be rather more radical than you in my goals. Team sports give us a good idea of what a human-scale team looks like - between 5 and 20 individuals. I am less sure what the longevity of a business should be: between 2 and 8 years seems like as good a guess as any. The ability to invest in the long term and to take on big projects is less inhibited by these restrictions than you might think: even the largest of today's businesses still need to raise outside finance and work together with other businesses to solve large problems; placing severe restrictions on the size of businesses will only help to increase the level of automation and systematic discipline when it comes to organising the crowd of small business-teams to take on large projects. In any case, we could hardly do any worse than our current economy on long-term planning and investment.
I am not sure how a government could encourage the formation of an economy formed largely of small, young businesses, I am only sure that it should.
My state, Virginia, recently passed a law that software contractors will need to be licensed in Software Engineering by the IEEE. The license test is only offered twice a year, costs several hundred dollars, and covers no topics on programming. And, if you're a corporation of a particular minimum size (that is particularly large), you're exempt from the requirement because supposedly such a large company would already be interested in protecting themselves from liability, so would conceivably be vetting their programmers. Except we know they don't, because there is no way to vet programmers like that, if the IEEE test is being held up as the standard.
This seems foolish.
Better tell McDonalds, IBM, Target, HP, GE, Pepsi, Coke, Home Depo, and Berkshire Hathaway they are now too big to fail.
Oh and dont' forget google, they have more than 20,000 employees, better break them up.
Actually why not just look down this list to see just how foolish your 20,000 person proposal would be:
http://money.cnn.com/magazines/fortune/fortune500/2012/perfo...
Note that by the time you get to company 49 they still employ more than 126,000 people.
EDIT Sorry I guess my point wasn't clear. My point is that employee size is a very poor measure of a company being "too big to fail".
Let me lay it out like this. Consider a fictitious burger company with 20,000 employees. With 50 states it can only employ 400 people in each state. If it went bankrupt it's very hard to see how this is "too big to fail".
Any company over a certain size (certainly way less than 20,000) institutes internal procedures for smaller groups within the company to coordinate. How would we not all be better off if those smaller groups were independent competing actors?
Recall that I gave a timeline of some two decades for phased implementation. Also note that a franchise model could serve many retail stores well. Subway sandwich shops are roughly as numerous as McDonalds, but the corporations themselves have nowhere near the same number of employees. A franchise model could be used for roughly half the companies in your list.
Isn't it more foolish to have dozens of companies that would destroy large parts of the country if something went really wrong with them? Haven't we learned that lesson by now?
Speaking of banks, Goldman Sachs has around 32k employees.
It's not clear whether any employees knew they were facilitating money laundering. What HSBC has been found guilty of (and what they are being fined for) is lacking sufficient controls to detect money laundering activity. This is quite different to wilfully and knowingly assiting money laundering for drug cartels.
All sorts of businesses are part of the cash economy and pay in large amounts of cash on a daily and weekly basis. The worst critiscm you can level here is that a lowly-paid cashier was insufficiently trained to spot potentially dubious sources of cash that were being paid in.
Actually reading the whole article... it's just sensationalist drivel. There is no claim compliance officers were laundering money. In fact a compliance officer goes no where near money. Bonus clawback is in reponse to weak controls, not becuase they were in the employ of drug cartels.
yeah that's ridiculous, but that's the US legal system for you and nothing to do with the banks.
1) Large organizations spend a ton of money and effort on legal compliance, while individuals and small organizations do not;
2) It's much more difficult to impute intent onto a large organization that is incidentally exposed to criminal activity as a matter of course.
The basic fact is this: if you're a bank operating in Central or Latin America, your accounts will be used for money laundering to some degree. This is true no matter how strong your controls are. This is just the nature of being an institution that offers banking services to the public in a country that is flush with drug money. However, if you're an individual and your accounts are used to launder drug money, that gives rise to a totally different inference of intent. Individuals rarely find themselves incidentally or accidentally involved with money laundering.
Yes, large organizations tend to get the "benefit of the doubt" in such cases, but it's wholly warranted.
If we were serious as a country about compliance with our laws we would have just stripped them of their US banking license. Of course this would have rather large ramifications for many other people that would mostly be bad.
Note that they chose not to indict HSBC. it's not that they didn't have enough to go on.
[#]: http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...
I can't see that anywhere in the link.
"HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk."
The document outlines a pattern of decisions by high level HSBC executives -- ranging from individual transgressions such as simply falsifying or sanitizing otherwise illegal transactions, to more long-term choices, such as ignoring basically everyone else in the industry as you mentioned earlier, and systematically under-resourcing compliance departments -- that led the bank to appear to comply with AML laws and regulations when in reality it was flagrantly violating them.
In fact, it is a crime to fail maintain an effective AML program if you are a bank, and HSBC does not dispute that they committed this crime.
From the document, page 3:
7. The Department alleges, and HSBC Bank USA admits, that HSBC Bank USA’s conduct, as described herein, violated the BSA. Specifically, HSBC Bank USA violated Title 31, United States Code, Section 5318(h)(1), which makes it a crime to willfully fail to establish and maintain an effective AML program, and Title 31, United States Code, Section 5318(i)(1), which makes it a crime to willfully fail to establish due diligence for foreign correspondent accounts.
The problem with AML laws is that they are so vague, it's impossible to ever really be sure you're in compliance. They turn banks into a privatised police force. How much effort should they make? Governments won't tell. They just say "be sensible about it". Banks hate this, as would you in their position, they want clarity about what to do, but governments don't want to give them a list of boxes to tick because they feel it'd be too slow and inflexible to keep up with criminals.
See the problem? Banks invest VAST sums in AML compliance. They develop automated software to spot suspicious transactions, they have massive internal compliance departments, they ID verify all their customers. It's a huge, huge drain (which is passed on to all of us, of course). But how much is enough? As far as the Justice Department is concerned, there can never be enough. Whilst criminals exist, it must mean failures of compliance by banks.
14. HSBC Bank USA maintained correspondent accounts for a number of foreign financial institutions, including HSBC Group Affiliates, within its Payments and Cash Management (“PCM”) business. HSBC Bank USA was required under the BSA to conduct due diligence on all foreign financial institutions with correspondent accounts, including HSBC Group Affiliates.
15. Despite this requirement, from at least 2006 to 2010, HSBC Bank USA did not conduct due diligence on HSBC Group Affiliates for which it maintained correspondent accounts, including HSBC Mexico. The decision not to conduct due diligence was guided by a formal policy memorialized in HSBC Bank USA’s AML Procedures Manuals.
...
17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk. During this period, HSBC Bank USA processed over 100 million wire transfers totaling over $300 trillion. Over two-thirds of these transactions involved customers in standard or medium risk countries. Therefore, in this four-year period alone, over $200 trillion in wire transfers were not reviewed in CAMP.
18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions. These included:
a. The U.S. State Department’s designation of Mexico as a “jurisdiction of primary concern” for money laundering as early as March 2000;
b. The U.S. State Department’s International Narcotics Control Strategy Reports from as early as 2002 stating with regard to Mexico that “the illicit drug trade continues to be the principal source of funds laundered through the Mexican financial system. . . . The smuggling of bulk shipments of U.S. currency into Mexico and the movement of the cash back into the United States via couriers, armored vehicles, and wire transfers, remain favored methods for laundering drug proceeds. Mexico’s financial institutions are vulnerable to currency transactions involving international narcotics- trafficking proceeds that include significant amounts of U.S. currency or currency derived from illegal drug sales in the United States. . . . According to U.S. law enforcement officials, Mexico remains one of the most challenging money laundering jurisdictions for the United States.”;
c. The April 2006 Financial Crimes Enforcement Network Advisory concerning bulk cash being smuggled into Mexico and deposited with Mexican financial institutions (discussed in paragraph 22 below);
d. The federal money laundering investigations that became public in 2007-08, involving Casa de Cambio Puebla, a Mexican-based money services business that had accounts at HSBC Mexico, and Sigue, a U.S.-based money services business, that had accounts at HSBC Mexico; and
e. The federal money laundering investigation into Wachovia for its failure to monitor wire transactions originating from the correspondent accounts of certain Mexican money services businesses, known as casas de cambio (“CDCs”), which became public in April 2008.
All of these advisories or events were known to numerous HSBC Bank USA AML officers and business executives at or near the time they occurred.
19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system. From 2006 until May 2009, when HSBC Bank USA raised Mexico’s risk rating to high, over 316,000 transactions worth over $670 b...
> 17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk.
> 18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions. These included:
> 19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category.
In other words, HSBC executives ignored industry guidance of the money laundering risks in Mexican institutions, and continued to rate the country as "standard risk", a rating which did not require monitoring in the CAMP system. They knowingly set the thresholds based on that rating, and they knew about the industry guidance, but the government has absolutely zero evidence that they set the rating with intent to facilitate money laundering.
From point 16, CAMP is the "Customer Account Monitoring Program" automated system which monitors wire transfers.
-> Therefore, HSBC Bank USA knowingly took "active steps to disable specific automated countermeasure."
Point 19 "Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system." (Point 18 establishes that "Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions")
-> Therefore, HSBC willfully disabled specific automated countermeasures.
=> Combine these two "therefore"s, and you'll see that milkshakes's statement is confirmed.
Or look at points 64-66, which establishes that HSBC Bank plc bypassed the automated system which detects funds transfers involving a Sanctioned Entity. They would put a "cautionary note in their SWIFT payment messages" the the messages would "[fall] into what HSBC Europe termed a “repair queue” where HSBC Europe employees manually removed all references to the Sanctioned Entities." HSB know about this since 2000, and their compliance group spoke up about it in 2003.
=> So there were at least two automated systems where "specific automated countermeasures" were "knowingly and willfully" bypassed.
These weren't all that hard to find - I looked for the word "automated".
What the USG is saying here is they think HSBC should have been treating internal HSBC-to-HSBC transfers as high risk and reviewing them all. But this doesn't make much sense for a single company. The lack of it certainly cannot be equated to a deliberate "disabling" of controls.
With respect to the repair queue, this is due to America's insane approach to sanctions - a transfer from country A to country B where there are no sanctions on B in A, that happens to get routed via a US bank, would have sanctions applied, despite that no laws were being violated by either party to the transaction. In order to work around this brain damage EU banks routinely edited ("repaired") wire transfers to avoid hitting the Great Firewall of America, safe in the knowledge that they were not violating any sanctions laws where they lived.
Later, the US decided that jurisdiction was such a bothersome concept they decided that anyone who made a transfer to Iran, anywhere, regardless of local laws at the time, was guilty of money laundering. See also: Standard Charter.
I don't think people here seem to realise the general backstory here. The US Government lies all the time. They routinely get innocent people to plead guilty without any kind of trial by threatening them with absurdly over-harsh penalties. The HSBC case is a classic example of this dynamic in action.
That is, that HSBC agrees that the information provided by the State Department, the April 2006 Financial Crimes Enforcement Network (“FinCEN”) Advisory, the money laundering lawsuits involving two of their customers, etc. from #18, and that this is "evidence of the serious money laundering risks associated with doing business in Mexico, in #19.
You cannot go from "well defined" to "entirely subjective". There are points in between, and to argue otherwise is bad style.
"this doesn't make much sense for a single company" - technically these are different companies, though some are wholly owned by others. That aside, some internal HSBC-to-HSBC transfers were illegal: "From at least 2000 through 2006, HSBC Group knowingly and willfully engaged in conduct and practices outside the United States that caused HSBC Bank USA and other financial institutions located in the United States to process payments in violation of U.S. sanctions."
Now, you're absolutely right that this is an "insane approach to sanctions." (We've switched from Mexico to the Middle East, btw, but that doesn't make a difference.) But you've just argued that communications with HSBC Mexico to HSBC Bank USA were a "single company", so it's a bit disingenuous to say that HSBC Europe is not part of the same company.
There's a nasty problem with jurisdiction, yes, but there are legal ways to resolve it. For one, stop doing business with US banks. But few want to do that, and the SWIFT network (and Snowden's disclosure of documents of how the US is systematically undermining the SWIFT-agreement) make it a gnarly process to completely disentangle from the US.
What you said is different. You wrote "EU banks routinely edited ("repaired") wire transfers to avoid hitting the Great Firewall of America, safe in the knowledge that they were not violating any sanctions laws where they lived." But point #67 says that "HSBC Group Affiliates intentionally hid the practice of amending payments involving Sanctioned Entities from HSBC Bank USA. As a result, during the relevant time period, HSBC Bank USA and other financial institutions in the United States processed hundreds of millions of dollars in transactions involving Sanctioned Entities in violation of U.S. sanctions."
You are right - they didn't break the law where they lived. But according to the statement of facts, you are also wrong - they sent transfers through the "Great Firewall of America", and caused HSBC Bank USA to break US law by not being able to provide the required compliance.
Regarding Standard Chartered, the London-based bank sent the funds through its New York unit, which is how both US and New York laws applied. It's not the case that the US was suing a foreign bank with no US ties.
"The US Government lies all the time. ... They routinely get innocent people to plead guilty without any kind of trial by threatening them with absurdly over-harsh penalties"
While the first is certainly true (see previous, with the US undermining the SWIFT agreement), that doesn't mean it's true all the time, or appropriate for this case. Again, technically this is a statement of facts agreed upon by both sides, and not one-sided accusations from the government.
Which leads to the second half of what I quoted from you. The US could be threatening to shut down HSBC Bank USA should they not comply, and this is the best HSBC could do under the circumstances. The reason I disagree with you here is that HSBC has plenty of legal, political, and economical resources to defend themselves against flagrantly false accusations.
Standard Chartered, for example, doesn't say that they w...
It seems like the frequency with which this was happening would suggest this could not have been hard to detect. Can we really blame this on a single lowly paid cashier? Am i missing something, or does this sound more like multiple cashiers taking comical cash deposits over a very long period?
Why should this lean toward being hard to detect and not willful ignorance and thus willful assistance?
So where is the protest?
Failure to Maintain an Effective Money Laundering Program, Failure to Conduct Due Diligence on Correspondent Bank Accounts Involving Foreign Persons (for the actions involving Mexican cartels and Saudi linked terrorist organisations), violating the International Emergency Economic Powers Act (for knowingly and willfully facilitating prohibited transactions with Iran, Libya, Sudan, and Burma), and violating the Trading With the Enemy Act (for moving money for Cuba).
from here - http://www.americancriminallawreview.com/Drupal/blogs/blog-e...
edit - and that's what they pled guilty to as their plea bargain after prosecution was dropped.
Yes, exactly, they are being penalised for weak controls as I said, not for wilful complicity in money laundering
> for knowingly and willfully facilitating prohibited transactions with Iran, Libya, Sudan, and Burma.... for moving money for Cuba
well that's got nothing to do with mexican drug money laundering, and whilst that may well have been in contravnention of US law at a moral or ethical level there's nothing (superficially) wrong here; plenty of reasons for legitimate business with these states which a UK company should be able to conduct if it chooses.
http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...
Mexican law prohibited most individuals from maintaining U.S. dollar denominated deposit accounts in Mexico unless they lived near the U.S.-Mexico border or were a corporation. However, Mexican law permitted almost any Mexican citizen to maintain offshore U.S. dollar accounts. These HSBC Mexico accounts were based in the Cayman Islands, but were essentially offshore in name only, because HSBC Mexico had no physical presence in the Cayman Islands and provided the front and back office services for these accounts at its branches in Mexico. Customers holding these accounts did all of their banking, including depositing physical U.S. dollars, at branches in Mexico. Nevertheless, the accounts were legal under Mexican and Cayman law.
33. In January 2006, HSBC Mexico conducted an internal audit of the Cayman Islands U.S. dollar accounts. At that time, there were only approximately 1,500 such accounts. Over 50 percent of the audited accounts lacked the proper KYC information, while 15 percent of audited accounts did not contain any KYC documentation. Over the next two years, nothing was done to address the KYC issues with these accounts. By 2008, there were 35,000 Cayman Island U.S. dollar accounts. At least 2,200 of these accounts were designated high risk due to suspicious activity within the accounts and/or negative information regarding the account owners.
In July 2008, the total outstanding balance of these high risk Cayman accounts was approximately $205 million. Without adequate KYC information, HSBC Mexico knew very little about who these high risk customers were or why they had such large amounts of U.S. dollars. However, even without the benefit of adequate KYC information, the risks were obvious. Indeed, one HSBC Mexico compliance officer noted “the massive misuse of [the HSBC Mexico Cayman Islands U.S. dollar accounts] by organized crime.” One example, identified by HSBC Group’s Head of Compliance in July 2008, involved “significant USD [U.S. dollar] remittances being made by a number of [HSBC Mexico’s Cayman Islands U.S. dollar] customers to a US company alleged to be involved in the supply of aircraft to drug cartels.” Case 1:12-cr-00763-ILG Document 3-3 Filed 12/11/12 Page 12 of 30 PageID #: 65 13 HSBC Mexico Failed to Terminate Suspicious Accounts
34. When suspicious activity was identified, HSBC Mexico repeatedly failed to take action to close the accounts. Senior business executives at HSBC Mexico repeatedly overruled recommendations from its own AML committee to close accounts with documented suspicious activity. In July 2007, a senior compliance officer at HSBC Group told HSBC Mexico’s Chief Compliance Officer that “[t]he AML committee just can’t keep rubber-stamping unacceptable risks merely because someone on the business side writes a nice letter. It needs to take a firmer stand. It needs some cojones. We have seen this movie before, and it ends badly.”
35. Even when HSBC Mexico determined a relationship should be terminated, it often took years for the account to actually be closed. In December 2008, there were approximately 675 accounts pending closure based on suspicions of money laundering activity. Closure had been approved for 16 of those accounts in 2005, 130 in 2006, 172 in 2007, and 309 in 2008. All 675 of these accounts remained open into at least 2009, with transactions being actively conducted through them despite facing pending closure based on suspicion of money laundering activity. HSBC Mexico’s High Volume of U.S. Dollar Exports
36. Between 2004 and 2007, HSBC Mexico exported over $3 billion U.S. dollars per year to the United States through Banknotes. In November 2007, Banco de Mexico, the central bank of Mexico, expressed concerns about the volume of U.S. dollars exported by HSBC Mexico back to the United States. Specifically, Banco de Mexico wanted an explanation as to why HSBC Mexico’s U.S. dollar exports were significantly larger ...
(0) I've been working in the software side of the financial analysis for over a decade. While not trivial, transaction analysis is very common for various purposes including compliance.
Agree. But at least he was clear in his first paragraph about the degree of his professionalism by saying this:
"Assistant Attorney General and longtime Bill Clinton pal Lanny Breuer has a message for you: Bite me."
If I were suspecting that a client's transaction was part of some tax evasion scheme, European Union law would require me to report it to the authorities (although it's not clear that these requirements are in themselves lawful).
All this nonsense costs lots of time and money for me and ultimately for my clients.
Meanwhile, it turns out that the scumbags who actually launder money, do it more or less out in the open and they are not even put to jail.
If they want to fight money laundering, fine, give me an account with a minimal cash flow limit or some other restrictions. But the modern regulatory regime has infected retail banking to such a degree that normal humans with good jobs can no longer open an account at all. Clearly professional criminals continue to work the system just fine, meanwhile.
I don't like this system when you need a bank account to get a home and utilities. Why can't you use cash? I don't like that the bank wanted your utility bills with your residential address just to create an account for you. What for? They want to control everything. I just don't like that.
You don't need an account.
In practice this is mostly implemented by demanding the person pay cash at a post office.
You do not need a bank account to pay for utilities in the US. I'm not saying not having one will be very pleasant though.
I came to the conclusion that in the US, if you have everything that people usually have (SSN, bank account, credit card, residential address, phone number, car, drivers license), you will be treated well. Miss just one on list, and people will assume that something is wrong with you, and it probably triggers a few warning signs (e.g. in fraud detection systems).
It may be coming from the fact that homeless and criminal elements usually miss a few on the list, so it was considered an easy signal for such pre-filtering, however, moving from a different country has the same signals, triggering multiple false alarms.
First, if you have just move there, and don't have a bank account, you don't have checkbook either (there are countries who has no checks at all) - no check by mail.
No utilities accepted credit or debit card, they always wanted to have a proper bank account number from me. Later on they have improved their system and now they offer online bill pay, with an extra "convenience fee" for credit cards. Hurray! (Although I am not sure if the bank account is still a requirement for opening.)
Btw. similar story applies for wireless service: I was required to provide my full employment contract to receive a simple phone number (at that point I had bank account, active employment...). How weird is that?
The wireless thing is because the phone companies treat the account as a credit account. The easy way around it is some prepaid plan (which is possible to fund in cash...). 5 years ago it wasn't such a good option. These days a $50 prepaid plan is at least reasonable, even if it isn't the best option.
For cellular, prepaid seems to solve all of the problems everywhere I've been. I ordered a prepaid SIM card here in the US over the internet with nothing but a credit card number, has full data service and everything. Same thing everywhere else I've travelled in the last year.
Around the beginning of 2013, I took a trip to UAE, Norway, and the Netherlands. In each of those, I was able to get a prepaid SIM card at the airport for cash, with nothing but a passport for ID. All with phone, text, and data service.
I also knew someone who paid their phone bill in person every month because he was a teenager and didn't have a checking account, but had a cell phone bill.
When I set it up, it required a phone call to turn on, and my name, um, not sure what else. No bank account or anything else. Just a phone call with my name.
So I feel pretty confident in recommending Lloyds in this case.
I think the case is that it's a rather non-deterministic process and the outcome depends a lot on exactly which manager you talk to and what their mood is like that day.
I think the easiest way to get a UK bank account as a foreign national is to be a student.
Also showing your current bank account statements will help.
But we'd rather refuse to open this simple checking account just because (...we're busy laundering money :-)...).
And no one gives you the exact goddamn reason or a simple solution.
Isn't it more fraudulent to give the bank home-made documents than to give them nothing? At least when you give then nothing you're being honest about what you're giving them.
As for me, I continue to print out bank statements on university printers and have everyone from embassies to landlords accept them.
No one I've met believes that going to your bank's website and printing out the PDF they give you is fraudulent.
Turns out he had just gone through the whole debacle himself. He had to show a bank statement, but he only has an online account. Went to the bank to get a statement printed and stamped, and whoever he went to turn it in to still refused it because it hadn't been mailed.
Personally, I don't want to give the BA any easy reason to reject my visa applications, I get all the mailed proof of address I can.
The fact that they are so easily manipulated is the reason they are most often not accepted as proof of identification, regardless of criminal law. It could be totally legal and it would be in the best interests of banks/businesses to not accept them due to possible liabilities.
Its not like I turn up with with 50k in 500 euro bills and want to open an account that day.
(The distinction is important in the current political climate, since the excuse "it's EU law" is abused by politicians to steamroll the local electorate into believing they have no say in the matter, and pretend they can not be challenged locally. That's how we got screwed with for instance data retention "laws" that are blatantly unconstitutional in several EU member states.)
(b) Regardless, an EU Directive is essentially an "EU law". It's a distinction without much of a difference.
(c) Some countries' constitutions say "All EU law/directives/whatever are binding and constitutional, unless the country leaves the EU". The Irish constitution has this sort of clause.
(d) EU law/directives/regulation is created by the EU. Which we vote on. European Parliament elections are coming up in 2014. If you think you have no say in the EU, vote in the EP elections and vote in your national elections. Those 2 directly elected bodies control EU law.
A lawyer most certainly does not have the duty to hide the crimes or confessions of his client(s). Not in the EU, not in the US (nor does a priest or doctor, but they can legally choose to do so in most jurisdictions. Anyone who is not a priest or doctor cannot make this choice : you have to report. In practice I've never seen anyone get sued for not reporting anything outside of financials).
Now as for the interpretation of this ... You have the US way (it's not illegal until a court says it is ... there's something to be said for that), and the EU way. The problem in the EU is that a lot of tax collection agencies are less than subtle and have legal rights that mean you simply don't want to even appear to cross them. In Western Europe, a tax agent has the right to shut down any business without specifying a reason, lock any account without specifying a reason, and take anything from any premise without a reason (or lock it down).
Does this violate the relevant constitutions ? Nobody's successfully challenged it as far as I know. (Yet another reason EU criticism of NSA data collection is ridiculously hypocritical).
That doesn't change the basic principle though. If you go to a lawyer saying "I killed this guy, get me out of it", he may go to the police and report you. While the lawyer is unlikely to get sued for not warning the police, when asked a lawyer MUST testify that this has indeed happened (same thing applies to anyone else for that matter).
Attorney-client-privilege is an English/American legal term with a lot of meanings to it shaped by the courts.
In the EU, different member states have rules regarding confidentiality between lawyers and clients. Usually, the right to confidentiality is not absolute (the lawyer may have an obligation to speak in certain situations).
For a while lawyers hoped that something like attorney-client-privilege could be interpreted into the European Convention for the Protection of Human Rights and Fundamental Freedoms. With the ruling above this seems less likely.
I'm asking because I work with lawyers in the EU from time to time and I've never had to provide ID etc. It was always a telephone call or email plus sometimes a retainer.
The idea that HSBC executives are guilty of... violating the article author's feelings about how anti-drug law should work, or something... is why you don't get your financial news from an unbalanced liar in Rolling Stone magazine. But even Taibbi can't seem to identify what precisely the executives are guilty of, an important prerequisite to prosecution in a nation governed by the rule of law.
As for the regulations, they are the reason why you can't open an account or move large amounts of money without giving the bank enough information to know a substantial portion of your entire financial history, and giving the bank permission to freeze your accounts approximately whenever they feel like it or whenever the government demands. You can think this is a good thing or a bad thing, but since you, Mr. Lawyer, complain about you having to burden yourself with the responsibility of knowing your client, surely you feel it's unfair that banks have to do the same thing? Not to mention the privacy implications.
If you read the DOJ's side of things, HSBC is guilty of things like "we said Mexico is high-risk, HSBC disagreed and so failed to automatically monitor a bunch of transactions," in more legalistic language.
I'm sure, however, that the US government can try to prosecute mid-level HSBC managers and maybe some random bank tellers in Jersey and Mexico and wherever. Somehow I doubt this is what the article author actually wants to happen.
They are not even doing that. And given your view that the executives should not get done because of mid level managers being responsible, what do you think of the fact that they are not being held to account either? Or do you honestly believe that this money was laundered through HSBC with nobody at HSBC helping?
There's absolutely no parallel here to the situation of ordinary people. If you see that Joe Schmoe's bank account was used to launder money from a drug cartel, you can very reasonably infer that he intended to assist that cartel. There's no reasonable explanation that involves trying to save money or hassle on regulatory compliance issues. Those sorts of transactions don't just accidentally or incidentally happen to ordinary people.
http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...
You can't just link a law and say "it says somewhere here someone can go to prison for some reason, so I'm sure that bank executives should go to prison." The Wikipedia article's blurb about prison does not seem to cover HSBC's conduct, but it's also hopelessly vague.
The Bank Secrecy Act carries with it an enormous amount of different regulations and different laws and different penalties. The exact part is what you need to make your "point". If you can't produce it, no point has been made.
The DOJ hasn't bothered to produce any reason to throw executives in jail, and I bet you can't either. Blithe self-righteousness is not a reason. A vague reference to a multi-hundred-page set of laws and regulations is not a reason.
New York State Penal Law Sections 175.05 and 175.10
edit - 175.10, which HSBC have admitted guilt to, is a class E felony in NY, which apparently has sentencing guidelines of up to four years in prison with a minimum of one year.
It's not at all uncommon for prosecutors to say things like that and then not file charges because they know they can't get a conviction.
[1] http://compliance.saiglobal.com/community/news/item/4420-che...
They are very much at fault.
We don’t need to cross-reference anything. You should be disproving things. Why? Because HSBC admitted guilt and liability.
Why not? You PAY him based on what that guy several layers down does...
And if you'd like to propose making it a crime, I'd encourage you to first think about how exactly it could be twisted - how to separate the really-morally-responsible the scapegoats, in advance, with nothing but legal language.
Strangely, libertarian hacker types tend not to come to their defense as quickly as they do bank executives.
Then you should be able to seize that individuals assets and while you can't send a company to jail you can bankrupt it.
If we're going to consider all companies as people then all laws should be applied to said people.
This is why the executives should be criminally chargeable. Banks are systemically important, but the executives are not.
There's a couple ways you could handle a "corporate death sentence" applied to a bank: 1. You could treat it as if the bank had failed completely -- all assets are forfeited, but customers receive refunds on insured (e.g., covered by FDIC) accounts only up to the amount insured. This would create some risk for large depositors, which could be considered bad, or could be considered good as it would encourage large depositors to take an active interest in how banks are run which would create pressure on behavior which would reduce the likelihood of needing to impose sanctions.
2. You could treat it as a facilitated sale of the corporation itself -- either in one unit or split into pieces with different buyers -- with any proceeds going to government rather than the shareholders.
No, in America (as everywhere else corporations exist, since this is the very definition of a corporation) a corporation is considered a legal person (that is, an entity subject to legal process in its own identity). In America, corporations have Tax ID numbers, which serve (for tax purposes, though not for Social Security itself) a purpose similar to Social Security numbers.
I don't receive any cash payments and I don't make any cash payments in my business. I am not a financial institution. This year, the value of the transactions that I participated in was probably around 100 million euro or so, and a fraction of a percent of this went through my account or ended up on my account, and all of it came from and went to banks. Not a cent was received in cash. Not a cent was paid out in cash. Now, HSBC and other banks probably have billions flowing through their system every second and in the order of millions received in cash or paid out in cash every second. I think it's natural to burden a few thousand banks with these rules, and not millions of small businesses.
If one were to adopt the position that it is the responsibility of business to prevent fraud, well, you have a unique ability to do that that no other institution has. This is why I think your post is hypocrisy. Banks aren't lawyers, they don't know your clients like you do, and if you adopt the principle that "people should be responsible for the actions of their customers", you're going to have a significant amount of responsibility that nobody else can handle.
I was under the impression this is how it worked eg. that lawyers' only responsibility are to their client. Otherwise you would get some kind of weird conflict of interest in every case.
Well, it is the responsibility of HSBC to prevent criminal fraud by HSBC, which is one of the charges they plead guilty to in their plea bargain.
First , they are responsible as managers like others said.
But we're talking about serious allegations of supporting terrorism. For a common citizen , any strong link to terrorism means some extra legal horrible torture . But for HSBC's managers , even repeated offenses and warnings mean nothing.
I'm not convinced that it wasn't completely obvious. The Mexico unit shipped $7 Billion to the US unit. Why did Breuer call it "stunning failures of oversight"?
> You don't send an executive to jail because a guy several layers down did something wrong
So why are the bonuses of those execs being cut if they are not to blame? Again, why did Breuer call it "stunning failures of oversight"?
I'm also not convinced they won't use this as a horrible excuse to unnecessarily increase monitoring, while the entire thing was plainly visible under an existing system. I would like cash to stay private, can i really not have that without something like this being invisible?
http://money.cnn.com/2012/12/10/news/companies/hsbc-money-la...
1. Just to be clear, they didn't put the anti money laundering people who were literally in charge of verifying compliance with these laws in jail either, even though they knew they were laundering money for the drug cartels. The government alleged, and HSBC never denied, that they had actual knowledge of what the money was being used for. It's not a case of "oh, well, i had no idea bob at the teller window was doing this".
This isn't "the guys several layers down did something wrong"
This is "We knew were laundering money for the drug cartels. We intentionally flouted the law (government's words) to keep it that way."
2. It's not "wrong", it's criminal. What HSBC did is criminal. They were charged criminally. This is a deferred prosecution agreement. They knew they were laundering money for drug cartels. "But even Taibbi can't seem to identify what precisely the executives are guilty of, an important prerequisite to prosecution in a nation governed by the rule of law." This isn't even close to right. You should try reading the charging documents that led to this settlement. The prosecutors make very clear what they are guilty of, and lay out a case that makes clear the executives knew exactly what was going on. They even created fake banking products to get around the law, too.
If your choice, as a banker, was to piss off a government hell-bent on making you a scapegoat and risk going in front of a jury of poor people who hate bankers, charged of violating a law it's impossible not to violate, and which carries a 20 year jail sentence, you would agree to a deal as well.
The US allegations were ridiculous anyway. They claimed HSBC "knew" there was money laundering taking place merely because money was moving from Mexico to America. I'm sure HSBC execs, having read newspapers and watched TV, were quite confident there was drug money in that stream. This is quite different to knowing precise account numbers of drug cartels with a high degree of certainty. I don't recall the latter being alleged, however.
36. Between 2004 and 2007, HSBC Mexico exported over $3 billion U.S. dollars per year to the United States through Banknotes. In November 2007, Banco de Mexico, the central bank of Mexico, expressed concerns about the volume of U.S. dollars exported by HSBC Mexico back to the United States. Specifically, Banco de Mexico wanted an explanation as to why HSBC Mexico’s U.S. dollar exports were significantly larger than its market share would suggest.
37. In February 2008, HSBC Mexico’s CEO met with the head of the CNBV and the head of Mexico’s financial intelligence unit, Unidad de Inteligencia Financiera (“UIF”). Again, the volume of HSBC Mexico’s U.S. dollar exports was raised as a concern. Specifically, HSBC Mexico’s CEO was told that law enforcement in Mexico and the United States were seriously concerned that the U.S. dollars being deposited at HSBC Mexico might represent drug trafficking proceeds. HSBC Mexico’s CEO was also told that Mexican law enforcement possessed a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money.
http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...
Perhaps you could clarify how it costs both your clients money and you money as well?
I'm assuming you are billing your clients for the work that is necessarily in one way or another for having to do this. Or it's part of your overhead and you base your rates in part on your overhead.
For sure it's a pain but there are many things that need to be done in order to be in business. They are necessary evils like filing tax returns or collecting social security numbers and making employees fill out various government required employment forms. It's called "the cost of doing business". Little minor bs that isn't anywhere close to going away.
It is simply the nature of white collar crimes, where the illegality of conduct usually depends on what the person was thinking, that it will be prosecuted less strongly than other kinds of crimes. This is a feature, not a bug.
Also, I love how people on here seem to think that only terrorists and cyberlibertarian money launderers deserve due process. E.g. Perlpimps comment that we should infer purely from circumstances intent that is either criminally negligent or affirmatively corrupt.
http://mobile.nytimes.com/blogs/dealbook/2012/12/10/hsbc-sai...
http://www.fatf-gafi.org/topics/high-riskandnon-cooperativej...
The FATF (Financial Action Task Force) co-ordinates AML regulations around the world. Note that Mexico is not on the list. Nor has it been there for a long time.
What's more, HSBC classified Mexico as standard risk but this did not override account level risk markers, it just meant they were not attempting to manually investigate every single wire transfer in or out of Mexico, an impossibly vast job. Wire traffic between US and Mexico is vastly larger than between, say, US and Algeria.
HSBC did not do anything wrong here.
For what it's worth, the 2009 IMF report on Mexico's FATF compliance[1] identifies a lot of issues regarding Mexico's AML process (see the ratings table starting at page 311).
Reading the Statement of Facts, I personally find the evidence compelling that there was a lot of blind eye turning at HSBC to say the least. Just one example:
When suspicious activity was identified, HSBC Mexico repeatedly failed to take action to close the accounts. Senior business executives at HSBC Mexico repeatedly overruled recommendations from its own AML committee to close accounts with documented suspicious activity. In July 2007, a senior compliance officer at HSBC Group told HSBC Mexico’s Chief Compliance Officer that “[t]he AML committee just can’t keep rubber-stamping unacceptable risks merely because someone on the business side writes a nice letter. It needs to take a firmer stand. It needs some cojones. We have seen this movie before, and it ends badly.”
(BTW I don't "keep saying this". It was my first comment on the topic. You probably confused me with milkshakes or dalke.)
[1] http://www.imf.org/external/pubs/ft/scr/2009/cr0907.pdf
Who gets "the produce" from Mexico again?
How does this get distributed in the US? Is the bigger profit in production or distribution?
In which country is an exporter payed usually? (this is not a hard question)
The bank is responsible, yes, but more responsible is who put the money in there. And who provided the money in exchange for a product.
It reminds me of this recent story:
http://www.policestateusa.com/2013/woman-probed-cavity-searc...
I see the logic of how unfair it is for no jail time for anyone at HSBC. Perhaps this is something that is highly unlikely or too steep a battle to fight. Maybe then, at least the settlement could have been more than the "record $1.92 billion settlement".
How about the $200 billion tobacco settlement as a baseline? Were HSBC's damages 1% what was settled in the tobacco case in 1998? Disclaimer: I'm an outsider to the legal profession, so pardon me if it's a silly comparison.
Come on - prosecute this one.
I remember an article about the new form of journalism at the end of the Rockefeller/Morgan era, where detailed and specific highlighting of the outrageous crimes brought about notable social change.
Perhaps this is the first story of the new wave - I would like to think so because only corrupt banking can get money cleaned for criminals - and cryptolocker is just the first of a new wave of crime.
Did you see that it's from 2012? (unfortunately only really visible in "20121213" in the URL, and the dates on his links) I guess it's a slow wave, if any.
http://www.bbc.co.uk/blogs/adamcurtis/posts/WHAT-THE-FLUCK
I don't have an issue with anyone accumulating wealth, but I do take issue with people who are able to use that wealth to circumvent the law and increase their wealth through illegal means.
Maybe I should have become a banker instead of a software developer.