Thread: Drug Money-Laundering Bank Was Big Obama Donor

AP

BY: Washington Free Beacon Staff
December 6, 2012 5:33 pm

Europe’s largest bank, Hong Kong and Shanghai Banking Corporation (HSBC), is negotiating a settlement with U.S. federal prosecutors for violating anti-money laundering laws, according to Reuters.

HSBC Holdings Plc might pay a fine of $1.8 billion as part of a settlement with US law-enforcement agencies over money-laundering lapses, according to several people familiar with the matter.

The settlement with Europe’s biggest bank—which could be announced as soon as next week—will likely involve HSBC entering into a deferred prosecution agreement with federal prosecutors, said the sources, who spoke on condition of anonymity.

President Barack Obama received more than $75,000 from HSBC during the 2008 and 2012 campaigns.

HSBC was hardly blindsided by the probe. The bank set aside $1.5 billion last month in preparation for a similar fine owed to the Mexican government for related violations. The cost for breaching laws in America may be “significantly higher,” according to Chief Executive Stuart Gulliver.

A July Senate Subcommittee report revealed that HSBC “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls.” Sen. Carl Levin (D., Mich.) was the subcommittee chairman who oversaw investigations:

HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.


Money-Laundering Bank Was Big Obama Donor | Washington Free Beacon

So was it's predecessor, Wachovia.

Whistleblower Who Blew the Lid Off the 2010 Multi-Million Dollar Wachovia Money Laundering Scandal Asks “Has Anything Changed”?


Despite all of the talk about reform in banking procedures and compliance, little has changed in the industry. AML Services International LLC has gathered the foremost experts on the subject to analyze this issue in an upcoming seminar in New York.

WEBWIRE – Thursday, June 14, 2012

Thirteen years after the Bank of New York money laundering scandal, and two years after the largest anti-money laundering penalty ever imposed on a U.S. bank, questions of compliance attitude still loom. Martin Woods, who investigated bank officials of Bank of New York, and who blew the lid off the 2010 Wachovia money laundering scandal, believes that little has changed.

“I investigated Bank of New York employees for the laundering of $10B of money of dubious Russian origin through the bank. That was 1999, so what has changed? I am not convinced there has been sufficient change in attitudes and culture at banks,” says Woods.

Law-enforcement scrutiny is increasingly focused on narcotics proceeds moving between the U.S. and Mexico. Wachovia Bank (now Wells Fargo) received $160 million in money laundering penalties in 2010, the largest penalty ever obtained under federal anti money laundering laws. The bank acknowledged its failure to adequately monitor the billions of dollars it processed for Mexican currency-exchange houses between 2004 and 2007, a money flow including at least $110 million of narcotics proceeds from Mexican drug cartels. The bank escaped prosecution, and so far, no employees have been indicted.

The lack of prosecutions of American financial institutions and senior management is frustrating. “Within the "Occupy" movement, perhaps we need a small group of former compliance officers who work to eliminate bad compliance practices,” he says.

The $160M penalty against Wachovia was supposed to send a message to the financial institutions that compliance mistakes can be costly. But banks make too much money moving dirty money. "There is a great imbalance in the trillions of dollars banks earn by moving dirty money and the tiny part of that money that’s being paid in penalties" says Saskia Rietbroek, partner of www.nomoneylaundering.com.

All these cases are connected. The Mexican money exchange houses, which were laundering money for the Mexican cartels, first banked with Union Bank of California. When this bank left the Mexican market because of regulatory pressure, Wachovia took over these clients. In just the three years, Wachovia processed $373 billion in wire transfers, $47 billion in checks and $4 billion in bulk cash deposits from the currency exchanges. When Wachovia left the Mexican market after receiving a $160M penalty for laundering, who took over the business? HSBC was Wachovia’s competitor in Mexico. HSBC was criticized in a 2010 enforcement action for having inadequate anti-money laundering controls in bulk cash and foreign correspondent banking. “The parallels with the Wachovia case appear to be striking,” says Rietbroek.

Rietbroek further adds “Earlier this year, HSBC put a $1B reserve on its balance sheet for enforcement actions. That points to more than just “inadequate anti-money laundering policies and procedures”. That points to dirty money.”

HSBC Holdings PLC is reported under investigation by a U.S. Senate panel in a money-laundering inquiry.

“The money that Wachovia has admitted laundering came from Mexico, the drugs come from and through Mexico, the 50,000+ murders took place in Mexico. All of these things are connected, this is the big picture.” says Woods.

Money laundering is not a victimless crime. The money people seek to launder through banks is connected to major crime, drug trafficking, people trafficking and murder. Our action or inaction can have a real impact upon the outcome.

“I hope to teach people who work in compliance and want to do the right thing. I am not sure what it takes to change attitudes and cultures at big financial institutions. The Dodd Frank Act will lead to more changes and more instances of whistleblowing. Firms need to have an internal program which engenders the confidence of both employees and regulators. The public is fast running out of patience. The media has shown them the connections between the drugs, the guns, the murders and the laundering and they want action,” says Woods.

Dennis Lormel, a former FBI agent, says: “The most surprising and troubling thing I realize is that the “tone at the top” in all these cases was not one of compliance. One would think that the marquee cases of the last few years would have changed that mind set. The still unfolding Wal-Mart case demonstrates the fracture between the business side of a major company and the compliance side. It also demonstrates that the business side trumps the compliance side.”

Lormel, Woods and Rietbroek will be speaking at a www.nomoneylaundering.comSeminar in New York on June 21, featuring intense compliance training using real life enforcement cases including HSBC, Wachovia, Lebanese Canadian Bank, Wal-Mart corruption, critical AML trends, challenges of working as a compliance officer wanting to do the right thing, and detecting money laundering and terrorist financing.

Our goal is to enhance the expertise, the ethics policies and operations and professionalism of people who work in anti-money laundering,” said Saskia Rietbroek, Partner at AML Services International.

Whistleblower Who Blew the Lid Off the 2010 Multi-Million Dollar Wachovia Money Laundering Scandal Asks “Has Anything Changed”?

Top recipients of campaign contributions from Wachovia, in 2008.

From Open Secrets.org
Top Recipients

Chamber	Member	Amount
Senate	Obama, Barack (D-IL)	$282,751
Senate	McCain, John (R-AZ)	$199,663
Senate	Clinton, Hillary (D-NY)	$109,250

Sounds like he UN was on board.
Drug money saved banks in global crisis, claims UN advisor

Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by financial institutions


The Observer, Saturday 12 December 2009
Drugs money worth billions of dollars kept the financial system afloat at the height of the global crisis, the United Nations' drugs and crime tsar has told the Observer.

Antonio Maria Costa, head of the UN Office on Drugs and Crime, said he has seen evidence that the proceeds of organised crime were "the only liquid investment capital" available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result.

This will raise questions about crime's influence on the economic system at times of crisis. It will also prompt further examination of the banking sector as world leaders, including Barack Obama and Gordon Brown, call for new International Monetary Fund regulations. Speaking from his office in Vienna, Costa said evidence that illegal money was being absorbed into the financial system was first drawn to his attention by intelligence agencies and prosecutors around 18 months ago. "In many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor," he said.

Some of the evidence put before his office indicated that gang money was used to save some banks from collapse when lending seized up, he said.

"Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way." Costa declined to identify countries or banks that may have received any drugs money, saying that would be inappropriate because his office is supposed to address the problem, not apportion blame. But he said the money is now a part of the official system and had been effectively laundered.

"That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another. The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was," he said.
The IMF estimated that large US and European banks lost more than $1tn on toxic assets and from bad loans from January 2007 to September 2009 and more than 200 mortgage lenders went bankrupt. Many major institutions either failed, were acquired under duress, or were subject to government takeover.

Gangs are now believed to make most of their profits from the drugs trade and are estimated to be worth £352bn, the UN says. They have traditionally kept proceeds in cash or moved it offshore to hide it from the authorities. It is understood that evidence that drug money has flowed into banks came from officials in Britain, Switzerland, Italy and the US.

British bankers would want to see any evidence that Costa has to back his claims. A British Bankers' Association spokesman said: "We have not been party to any regulatory dialogue that would support a theory of this kind. There was clearly a lack of liquidity in the system and to a large degree this was filled by the intervention of central banks."
​http://www.guardian.co.uk/global/2009/dec/13/drug-money-banks-saved-un-cfief-claims

ADDED TO ALIPAC HOMEPAGE News with amended title ..

http://www.alipac.us/content/drug-mo...ma-donor-1203/

HSBC: TOO BIG TO JAIL



by SYDNEY WILLIAMS 15 Dec 2012

It is not often that I find myself in agreement with the editorial page of the New York Times, but I did on Wednesday. The Times criticized the $1.92 billion settlement agreed to by HSBC as “a dark day for the rule of law.” No bank executives, according to the LA Times, were charged. While $1.92 billion sounds like a lot, it is about 0.06% of the banks $2.6 trillion in assets. All banks stretch the limits and meaning of regulation. HSBC, the world’s third largest bank, and one that has been frequently warned, has simply been the most egregious. Without the rule of law, civil society devolves into either totalitarianism or anarchy.

The problem is not just the fact that no one at HSBC was jailed for criminal activities that make Jessie James, Willie Sutton and Bernie Madoff look like amateurs; it is that there seems to be collusion between the bad guys (the big banks) and government. The government imposes fines, which appear steep but are manageable, payable to the agencies charged with monitoring their behavior. It is symbiotic, crony capitalism. Banks simply look at fines as a regular cost of doing business. Agencies view them as a source of revenues. It is the public, the bank’s customers and shareholders who bear the cost. Society’s moral fiber becomes weakened.

What HSBC did was knowingly launder money for drug cartels in Mexico and Colombia, and provide banking services for countries known to harbor terrorists and for exporting terrorism. Both are in contradiction with stated American policy, but more importantly, both violate common rules of humanity. Mexican drug lords are not known for their niceties. According to the current issue of the Economist, 60,000 Mexicans, including 60 mayors, have been killed in the past six years. Bloomberg reports that the cartels used cash boxes precisely the dimensions of “tellers’ windows in HSBC’s Mexican branches.” Colombian narcotics dealers sell drugs in the U.S and then send the funds to Mexican banks to be converted into Colombian pesos. Additionally, the bank has provided banking services for countries like Cuba, Iran, Libya and Sudan. Stuart Gulliver, CEO of HSBC, in paying the fine and accepting responsibility, said “We are profoundly sorry” for what his bank did. Really?

American officials said that they were fearful of imposing punishment so severe that a bank could be destroyed in the process. Fed officials have little concern about smaller banks and the hedge fund industry, which they persist in trying to topple. But big banks remain in a class by themselves. Senator Carl Levin (D-MI) praised the settlement saying that it sends a “powerful wake-up call to multinational banks about the consequences of disregarding their anti-money-laundering obligations.” I suspect the real message is get big enough and you won’t have to worry. It seems beyond credibility that executives who so blatantly violated federal laws should be allowed to go free. While HSBC stock, at $51.68, remains below its all-time high price of $99.52 set in October 2007, it is up 36% year-to-date – not too shabby.

Despite the reluctance of the federal government to prosecute executives of very large banks who have violated more laws than Willie Sutton, we are living, according to the New York Times, in “the era of the star prosecutor in white-collar crime.” The paper noted that Preet Bharara, U. S. Attorney for Manhattan, was on the cover of Time magazine and got a shout-out from Bruce Springsteen during a recent concert, because of his decision to go after hedge funds for “insider trading.”Certainly trading on inside information is wrong and deserves punishment, but in a world in which information flows like the Mississippi it is difficult to determine what is right and what is wrong. The real reason the Bharara’s of the world go after hedge fund managers is because of the widely spread notoriety of their incomes, which, admittedly, seem excessive at a time of persistent high unemployment. However, their incomes are paid by sophisticated investors. Nevertheless, even if their crimes prove true, their actions pale in comparison to the practices of banks like HSBC. The bank laundered $881 million from drug cartels like Sinaloa in Mexico and Norte del Valle in Colombia. Thousands of deaths have resulted from these cartels and millions of Americans have suffered the consequences of their products. The same bank violated sanctions imposed against regimes by our government. The sanctions were meant to contain terrorist activity. Are not these crimes far more damaging to our society than those highly publicized investigations into the possibility that some hedge funds traded on information that may or may not have been received legitimately?

What message about our society does all this send to our children and to all those who strive to play by the rules? You can escape punishment if you become an executive at a bank “too big to fail and jail,” As a prosecutor, you get shout-outs from rock stars if you indict a well known hedge fund manager, even if his innocent. If, as a hedge fund manager, you achieve enormous financial success you are automatically deemed a piranha to society, and thus a target for an over-eager prosecutor looking to add another notch to his holster. Firms too small to defend themselves are deemed small enough to fail and jail. It is a rotten message, but unfortunately one that captures the spirit of the downward spiral of our culture.

HSBC: Too Big to Jail

Too Big to Indict

Published: December 11, 2012
406 Comments

It is a dark day for the rule of law. Federal and state authorities have chosen not to indict HSBC, the London-based bank, on charges of vast and prolonged money laundering, for fear that criminal prosecution would topple the bank and, in the process, endanger the financial system. They also have not charged any top HSBC banker in the case, though it boggles the mind that a bank could launder money as HSBC did without anyone in a position of authority making culpable decisions.

Clearly, the government has bought into the notion that too big to fail is too big to jail. When prosecutors choose not to prosecute to the full extent of the law in a case as egregious as this, the law itself is diminished. The deterrence that comes from the threat of criminal prosecution is weakened, if not lost.

In the HSBC case, prosecutors may want the public to focus on the $1.92 billion settlement, which includes forfeiture of $1.26 billion and other penalties, as well as requirements to improve its internal controls and submit to the oversight of an outside monitor for the next five years. But even large financial settlements are small compared with the size of international major banks. More important, once criminal sanctions are considered off limits, penalties and forfeitures become just another cost of doing business, a risk factor to consider on the road to profits.

There is no doubt that the wrongdoing at HSBC was serious and pervasive. Several foreign banks have been fined in recent years for flouting United States sanctions against transferring money through American subsidiaries on behalf of clients in countries like Iran, Sudan and Cuba. HSBC’s actions were even more egregious.

According to several law enforcement officials with knowledge of the inquiry, prosecutors found that, for years, HSBC had also moved tainted money from Mexican drug cartels and Saudi banks with ties to terrorist groups.

Those findings echo those of a Congressional report, issued in July, which said that between 2001 and 2010, HSBC exposed the American “financial system to money laundering and terrorist financing risks.” Prosecutors and Congressional investigators were also alarmed by indications that senior HSBC officials might have been complicit in the illegal activity and that the bank did not tighten its lax controls against money laundering even after repeated urgings from federal officials.

Yet government officials will argue that it is counterproductive to levy punishment so severe that a bank could be destroyed in the process. That may be true as far as it goes. But if banks operating at the center of the global economy cannot be held fully accountable, the solution is to reduce their size by breaking them up and restricting their activities — not shield them and their leaders from prosecution for illegal activities.

A version of this editorial appeared in print on December 12, 2012, on page A38 of the New York edition with the headline: Too Big to Indict.

http://www.nytimes.com/2012/12/12/op...dict.html?_r=1&