Two reports out today indicate that the U.S. Justice Department is cooking up a deal to let HSBC — which the world knows as the leading British drug bank — avoid criminal prosecution by paying a fine of at least $700 million and perhaps as large as $1 billion. Such a fine — no big deal for a bank of HSBC's size — is a far cry from criminal prosecution and terminating the bank's license to operate in the U.S., which the Senate Permanent Investigations Subcommittee report, issued in July, suggested should be done.
The New York Times reports today that prosecutors are investigating HSBC's laundering of money for Mexican drug cartels, and its dealings with terrorist-linked Saudi banks, as well as its violations of sanctions pertaining to Iran, Sudan, and North Korea. The Times states that the money-laundering accusations against HSBC are "far more extensive" than the violations being investigated against Deutsche Bank, Commerzbank, BNP Paribas, Credit Agricole, and RSB for sanctions violations. The Times account goes into some detail about HSBC's money-laundering, citing the Senate report.
Pressure to resolve the HSBC increased after the New York State action against Standard Chartered, and also because of the LIBOR scandal, the NY Times says. Bloomberg says that a settlement being worked out between HSBC and the Manhattan District Attorney, was slowed because of the Standard Chartered action and the threat to revoke Stardard Chartered license.
It is clear from both stories, that the spotlight placed on these banks' money-laundering practices is making it harder for federal regulators and prosecutors to continue making the type of sweetheart deals that it has been concluding up to this point.
"This is an epidemic of banks willfully, consistently violating economic sanctions," Jimmy Gurule, a former Treasury Department official, told Bloomberg. "It calls for more serious sanctions than a monetary fine," Gurule said, noting that a fine only impacts shareholders. Referring to six previous federal settlements which resulted in deferred-prosecution agreements, plus the Standard Chartered case in New York State, Gurule went on to declare: "Here we are at bank number seven ... and no individual banker has been held criminally responsible, and that's a shame."
The Times said that in July, which was when the Senate report was issued, HSBC stepped up efforts to reach a settlement with federal prosecutors by September, but that both the DOJ and the Manhattan District Attorney (Cyrus Vance, Jr.) needed more time to go over HSBC records and to determine the extent of its wrongdoing.
After the Senate report on HSBC's money-laundering and terrorist financing came out in July, EIR was told that Chairman Carl Levin had referred the HSBC case to the Justice Department for criminal prosecution, and that the entire Senate report was transmitted to the DOJ. The Senate report itself stated that revoking a bank's charter is is one of the formal enforcement actions available to bank regulators, along with referring misconduct for criminal prosecution. Subsequent inquiries by EIR yielded what was effectively a "neither confirm nor deny" answer from the Justice Department, with a spokesman responding, "I don't have any comment for you on these matters."
What is still to be determined, is whether there will be sufficient pressure on the Obama Administration to force it to finally break its pattern of refusing to prosecute both the major Wall Street and European banks for their crimes, both for money-laundering, and for their frauds and swindles which resulted in the 2007-08 financial collapse.