“….more than 17,600 other record[s]… allegedly show how senior banking officials allowed fraudsters to move money [£1.5 trillion] between accounts in the knowledge that the funds were being generated or used criminally.
Five global banks were named in the investigation: JPMorgan Chase, HSBC, Standard Chartered, Deutsche Bank and Bank of New York Mellon.”1 (my emphasis)
The sums of money traded illegally are stupendous. Banking fraud isn’t a victimless crime. These bankers’ actions facilitated corruption, terrorism and weaken the tax base of host countries. They undermine society. Companies are fined if bankers are caught and can’t evade penalties, which they usually do. The perpetrators – management – suffer a maximum penalty of being sacked. Shareholders pay for this criminality in reduced dividends and business opportunities.
HSBC is a British high street bank with a global ‘footprint’. It’s also a criminal organisation. The bank profited from Mexican drug money laundering and managers enhanced their bonuses.2 Drug ‘soldiers’ deposited – in cash – $881 million, which is systemic illegality. HSBC paid a $1.9 billion fine to American financial regulators.
“Even though federal investigators found evidence “that senior bank officials were complicit in the illegal activity,” no HSBC executives faced charges for their actions.”3 (my emphasis)
Managers incorporate fines into their business plans and aren’t a deterrent. HSBC was fined a further £63.9 million in 2021. This time the fine was for, “inadequate monitoring of money laundering and terrorist financing scenarios until 2014,…” (my emphasis)4 It took seven years to bring the case to fruition because of the uneven ‘balance of power’ between prosecutors and the banks. Banks regard banking laws and fines with utter contempt.
HSBC isn’t a solitary ‘bad apple’. British banking is notorious as a money laundromat for Russian oligarch and Mafia money. RBS, which was 72% state owned, was fined for, “…paying around £365m into the customer’s accounts, of which around £264m was in cash.” (my emphasis) This was the first time that criminal proceedings were used.5
RBS was fined £264.8 million but, “it [The Financial Conduct Agency] will not take action against any individual current or former employee of NatWest in respect of this case.”6 (my emphasis)
HSBC and other global banks are enormous. There’s a myriad of layers of management between money laundering and the principals who set the culture of the organisation. Squadrons of lawyers, accountants and PR lobbying machines drag cases out for years. Prosecutors are swamped with millions of documents, emails and other electronic systems to delay and obfuscate. Proving any single banker is responsible for anything is virtually impossible. The only solution is generic guilt. Executive directors who drive the culture of the organisation should take the hit. As Harry Truman famously said, The buck stops here’.7 Senior bankers receive multiples of millions of pounds and accepting responsibility for criminality should be part of their duty. It would incentivise them to beef up compliance departments.
“The primary money laundering offences under POCA [Proceedings of Crime Act] carry a maximum penalty of 14 years’ imprisonment and/or an unlimited fine. Offences under the Regulations are punishable with a maximum penalty of two years’ imprisonment (for individuals) and/or an unlimited fine.”8 (my emphasis)
A small-scale fraudster who ‘washed’ £255,000 through her bank was given a suspended sentence of two years.9 Even egregious fraudsters like David Ames loot relatively – in comparison to banks – small amounts of money. In his case it was £226 million. Ames was jailed for 12 years.10
There is no desire to imprison bankers. They are believed to be vital to the British economy and anything which hampers ‘wealth creation’ must be avoided. The furthest the legal system will go is inflicting fines on their companies. They don’t even lose bonuses, which were paid because of criminal behaviour. Small scale fraudsters are paraded as if they prove banking regulations are effective.
The inspiration for this blog came from a book reviewed here Book Review: Oliver Bullough ~ Butler to the World: How Britain became the servant of tycoons, tax dodgers, kleptocrats and criminals (2023) | Odeboyz’s Blog (oedeboyz.com)
The TV series McMafia is also in this territory and is very watchable McMafia – Wikipedia It is streamed on Amazon
1 World’s biggest banks ‘allowed criminals to launder dirty money’, leaked documents allege | Business News | Sky News ICIJ are the International Consortium of Investigative Journalists
2 HSBC’s Money Laundering Scandal (investopedia.com)
3 Netflix documentary re-examines HSBC’s $881 million money-laundering scandal – MarketWatch See also the debate in parliament, 2017, Money Laundering: British Banks – Hansard – UK Parliament
4 HSBC fined £64m for anti-money laundering failings – BBC News
5 Royal Bank of Scotland group faces criminal proceedings over money laundering | HeraldScotland
6 NatWest RBS fined £265m for money laundering – Daily Business (dailybusinessgroup.co.uk)
8 Money Laundering Offences | The Crown Prosecution Service (cps.gov.uk) see also Anti Money Laundering Laws and Regulations Report 2022-2023 United Kingdom (iclg.com)
9 Ex-bank manager sentenced for £255,000 money laundering | The Crown Prosecution Service (cps.gov.uk)
10 Fraudulent Caribbean resorts owner convicted after SFO investigation – Serious Fraud Office