Tuesday, December 11, 2012

Why not jail time?

HSBC, a global bank, $1.92 billion if fines via a settlement by state and federal authorities.  "The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries." [HSBC to Pay $1.92 Billion to Settle Charges of Money Laundering].

A settlement instead of criminal prosecution because of "concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system." Sounds familiar.

Here is HSBC's take: "HSBC has reached agreement with United States authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws." Nit picking maybe, but "inadequate compliance?

But it is not the first time. According to the Chicago Tribune: "The settlement is the third time in a decade that HSBC has been penalized for lax controls and ordered by U.S. authorities to better monitor suspicious transactions." No three strikes law.

And check this - HSBC appears to have had attention drawn to its practices by the U.S. Attorney in Wheeling, West Virginia, that "[i]n 2008, began investigating allegations that a local doctor used the bank to launder money from Medicare fraud." [Chicago Tribune]

The Chicago Tribune notes that "[a]nalyst Jim Antos of Mizuho Securities said the settlement costs were "trivial" in terms of the company's book value. But in terms of real cash terms, that's a huge fine to pay," said Antos, who rates HSBC a "buy".

And HSBC is not alone. The Chicago Tribune states that "[s]uch settlements have become commonplace." Take a peek at the banks identified by the Chicago Tribune that have settled over similar charges: ING Bank NV, Switzerland's Credit Suisse Group, Britain's Lloyds Banking Group and Barclays, and ABN Amro Holding NV, a Dutch bank acquired by Royal Bank of Scotland Group Plc and a bank consortium in 2007. In the United States, J.P. Morgan Chase & Co, Wachovia Corp and Citigroup Inc.

Crime does pay, if you are a respectable financial institution.

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