5 ms·

Why the U.S. Treasury Killed a Latvian Bank

101 points by marksomnian 9y ago

curiousgal 9y ago
Tl;DR: They thought they were laundering money.
- sschueller 9y ago
  I guess if you are big enough you only get a small fine. e.g. HSBC
  - JumpCrisscross 9y ago
    > small fine, e.g. HSBC HSBC was fined nearly $2 billion [1]. (Still a shame none of the complicit went to jail.) https://www.marketwatch.com/story/netflix-documentary-re-examines-hsbcs-881-million-money-laundering-scandal-2018-02-21 https://www.marketwatch.com/story/netflix-documentary-re-exa...
    - madaxe_again 9y ago
      At their scale, that's a small fine. Barely 10% of annual net profit.
      - JumpCrisscross 9y ago
        Better metric is relative to Mexican, or North American, profits. Those are the markets in which they did their shenanigans. Relative to those, it’s a substantial absolute and relative sum.
        lukeschlather 9y ago
        If I'm interpreting the article correctly, they made at least $888 million off of their scheme. It's likely that a significant amount of their illicit profit was not detected by the enforcement agencies, so $2 billion sounds like they potentially profited even factoring in the fine, it's only a little over twice their profit.
        wavefunction 9y ago
        You have to make the entire organism pay a price or else it gets laughed off as a temporary setback. Jail these folks, and the folks they reported to. You start throwing some bankers in jail and you'll see some magic "self-regulation" kick in.
        jessaustin 9y ago
        The last thing federal prosecutors want to do is make rich and powerful white people worry. They know which side their bread is buttered on.
      - busterarm 9y ago
        Hell, Wachovia got off with a $160mil fine and all they had to do was buy and change their name to Wells Fargo!
      - acct1771 9y ago
        And the entities that received that fine money? Likely complicit in that some of the laundering themselves. So, what was fixed?
  - trhway 9y ago
    Didn't HSBC get off by permanently opening all it's books/accounts worldwide to USG?
- PeterisP 9y ago
  From a local perspective, they kind of probably were doing so (though no official judgements yet to prove/disprove that). They have a rather limited local presence, but enormous amounts of foreign (Russian&area) deposits that constitute the vast majority of their deals and profit. It's an open question whether the particular deals were technically prohibited or not, but it quite certainly involved handling a large amount of shady money that wasn't freely usable in the west directly and so needed services of this bank.
deleted 9y ago
[deleted]
freddybobs 9y ago
"At their scale, that's a small fine. Barely 10% of annual net profit." HSBC was the bank of money laundering of the mexican drug cartels. They also helped fund terrorist organisations like ISIS. They made it possible to at scale deal drugs in the US. When they were caught doing this - they shrugged and said they'd try better. Then they got caught doing it again. And they said sorry. Eventually the government was aiming to indict the bank. There would be criminal charges. People would go to jail. It is a small fine compared with their conduct. They got 'let off' at the last minute arguably because of 'systemic risk'. Too big to fail. Again. You can find all about it on Dirty Money on Netflix.
- jimrandomh 9y ago
  > "At their scale, that's a small fine. Barely 10% of annual net profit." That quote does not appear in the linked article. Where does it come from, and who is "their"?
  - frgtpsswrdlame 9y ago
    It's a misplaced comment, looks like it was meant to reply to another commenter below. https://news.ycombinator.com/item?id=16496055 https://news.ycombinator.com/item?id=16496055
  - freddybobs 9y ago
    Sorry - that was from a comment below, and wasn't really what I was responding to. 'Their' means HSBC. Assuming the documentary is accurate - that HSBC was the go to bank for money laundering. That was a big part of their business. That they went out of their way to hide transactions from the government (like transactions to ISIS and cartels). When caught they repeatedly got away with a shrug. That 100k people have been murdered related to mexican cartels - and the claim is that mexican cartels couldn't have operated at that scale without HSBC. I was responding to the comment below that seemed to be saying the fine was 'big enough'. Which the documentary didn't agree with. The people that brought the charges and investigated HSBC didn't think so. Neither did the journalists who were there when the government tried to pass off the deal as a big success. The management didn't lose jobs. The worst that happened to them was that part of their bonuses were kept back. Oh and the government dropped all charges in 2017. That part of the deal was the charges remained - ie they did commit crime but suspended sentencing. https://www.reuters.com/article/us-hsbc-usa/hsbc-draws-line-under-mexican-cartel-case-after-five-years-on-probation-idUSKBN1E50YA https://www.reuters.com/article/us-hsbc-usa/hsbc-draws-line-... https://inhomelandsecurity.com/hsbc-cartel-money-laundering/ https://inhomelandsecurity.com/hsbc-cartel-money-laundering/ https://www.rollingstone.com/politics/news/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213 https://www.rollingstone.com/politics/news/outrageous-hsbc-s... (edit: grammar/spelling fixes)
fulafel 9y ago
"Since the U.S. dollar dominates international transactions, banning U.S. correspondent banking relationships with ABLV amounts to shutting it out of the global financial network" How does this figure? Anyone can buy/sell USD on the global FX market, and so pay/accept USD, no?
- simonh 9y ago
  It they can't do any deals or transactions denominated in dollars with any other financial institutions with links to the US, which is most of them. That also means the ones left that they can deal with can pretty much charge whatever they like.
- wtfstatists 9y ago
  No because to really hold USD, your bank would need its own account on FedWire [1] (USD's Real Time Gross Settlement) in which money is legally guranteed. Alternatively your bank can have an account with a bank (called Correspondent Bank) that have account on FedWire. Any more indirections would be too risky. If your bank has neither, then no other bank would talk to your bank over SWIFT/CHIPS/RIPPLE/etc, making your bank basically banned from USD banking. Usually and and in this case, even accusations or investigation of money-laundering/etc would make a CB to derisk [2][3] and proactively cancel account of accused bank or CB would risk access to FedWire. This is how USG was able to force FATCA over the world. [1] https://www.federalreserve.gov/paymentsystems/fedfunds_about.htm https://www.federalreserve.gov/paymentsystems/fedfunds_about... [2] https://google.com/search?q=correspondent+bank+de+risking https://google.com/search?q=correspondent+bank+de+risking [3] https://www.americanexpress.com/us/content/foreign-exchange/articles/fedwire-us-dollar-in-international-payments/ https://www.americanexpress.com/us/content/foreign-exchange/...
  - twic 9y ago
    > Any more indirections would be too risky. I'm not sure this is quite true. There is a thriving and legitimate market in "eurodollars", deposits denominated in US dollars but held outside the US, and specifically beyond the reach of US authorities. The question is whether you would be able to make much use of such deposits without US cooperation. It would definitely be difficult, but it might be possible. I am by no means an expert on this, but i came across an interesting case from the '80s - Libyan Arab Foreign Bank v Bankers Trust Co. Section 3.4 of this book describes it: https://books.google.co.uk/books/about/Freezing_Assets.html?id=34WwCwAAQBAJ&redir_esc=y https://books.google.co.uk/books/about/Freezing_Assets.html?... And there's a wider discussion here: http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1622&context=auilr http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?a... The upshot is that a UK judge decided that it was possible to pay out a dollar balance held in London without involving the US. It seems there were several plausible ways to do it. Whether that's still true, i have no idea. Interesting stuff, anyway.
nraynaud 9y ago
I don’t see a lot of due process in this execution. Upholding the values of the constitution is only a week-end hobby?
- sathackr 9y ago
  Our government feels that the "all men" in "all men are created equal, that they are endowed by their Creator with certain unalienable rights" really just means US citizens. The courts have held over and over that our constitution does not protect the rights of non-citizens. That's why we can legally execute a 'terrorist' in another country with a missile fired from a drone without even so much as them being charged with a crime. With all the false convictions of US Citizens that make it through our "due process," I wonder how many of those extrajudicial executions were based on incorrect information? Rarely do they even want to respect the constitution for actual US citizens. The protections and rights granted are slowly being chipped away by the executive and legislative branches, and now even the judicial branch is becoming politicized.

101 points by marksomnian 9y ago

curiousgal 9y ago

Tl;DR: They thought they were laundering money.

sschueller 9y ago
I guess if you are big enough you only get a small fine. e.g. HSBC
- JumpCrisscross 9y ago
  > small fine, e.g. HSBC HSBC was fined nearly $2 billion [1]. (Still a shame none of the complicit went to jail.) https://www.marketwatch.com/story/netflix-documentary-re-examines-hsbcs-881-million-money-laundering-scandal-2018-02-21 https://www.marketwatch.com/story/netflix-documentary-re-exa...
  - madaxe_again 9y ago
    At their scale, that's a small fine. Barely 10% of annual net profit.
    - JumpCrisscross 9y ago
      Better metric is relative to Mexican, or North American, profits. Those are the markets in which they did their shenanigans. Relative to those, it’s a substantial absolute and relative sum.
      - lukeschlather 9y ago
        If I'm interpreting the article correctly, they made at least $888 million off of their scheme. It's likely that a significant amount of their illicit profit was not detected by the enforcement agencies, so $2 billion sounds like they potentially profited even factoring in the fine, it's only a little over twice their profit.
      - wavefunction 9y ago
        You have to make the entire organism pay a price or else it gets laughed off as a temporary setback. Jail these folks, and the folks they reported to. You start throwing some bankers in jail and you'll see some magic "self-regulation" kick in.
        jessaustin 9y ago
        The last thing federal prosecutors want to do is make rich and powerful white people worry. They know which side their bread is buttered on.
    - busterarm 9y ago
      Hell, Wachovia got off with a $160mil fine and all they had to do was buy and change their name to Wells Fargo!
    - acct1771 9y ago
      And the entities that received that fine money? Likely complicit in that some of the laundering themselves. So, what was fixed?
- trhway 9y ago
  Didn't HSBC get off by permanently opening all it's books/accounts worldwide to USG?
PeterisP 9y ago
From a local perspective, they kind of probably were doing so (though no official judgements yet to prove/disprove that). They have a rather limited local presence, but enormous amounts of foreign (Russian&area) deposits that constitute the vast majority of their deals and profit. It's an open question whether the particular deals were technically prohibited or not, but it quite certainly involved handling a large amount of shady money that wasn't freely usable in the west directly and so needed services of this bank.

deleted 9y ago

[deleted]

freddybobs 9y ago

"At their scale, that's a small fine. Barely 10% of annual net profit." HSBC was the bank of money laundering of the mexican drug cartels. They also helped fund terrorist organisations like ISIS. They made it possible to at scale deal drugs in the US. When they were caught doing this - they shrugged and said they'd try better. Then they got caught doing it again. And they said sorry. Eventually the government was aiming to indict the bank. There would be criminal charges. People would go to jail. It is a small fine compared with their conduct. They got 'let off' at the last minute arguably because of 'systemic risk'. Too big to fail. Again. You can find all about it on Dirty Money on Netflix.

jimrandomh 9y ago
> "At their scale, that's a small fine. Barely 10% of annual net profit." That quote does not appear in the linked article. Where does it come from, and who is "their"?
- frgtpsswrdlame 9y ago
  It's a misplaced comment, looks like it was meant to reply to another commenter below. https://news.ycombinator.com/item?id=16496055 https://news.ycombinator.com/item?id=16496055
- freddybobs 9y ago
  Sorry - that was from a comment below, and wasn't really what I was responding to. 'Their' means HSBC. Assuming the documentary is accurate - that HSBC was the go to bank for money laundering. That was a big part of their business. That they went out of their way to hide transactions from the government (like transactions to ISIS and cartels). When caught they repeatedly got away with a shrug. That 100k people have been murdered related to mexican cartels - and the claim is that mexican cartels couldn't have operated at that scale without HSBC. I was responding to the comment below that seemed to be saying the fine was 'big enough'. Which the documentary didn't agree with. The people that brought the charges and investigated HSBC didn't think so. Neither did the journalists who were there when the government tried to pass off the deal as a big success. The management didn't lose jobs. The worst that happened to them was that part of their bonuses were kept back. Oh and the government dropped all charges in 2017. That part of the deal was the charges remained - ie they did commit crime but suspended sentencing. https://www.reuters.com/article/us-hsbc-usa/hsbc-draws-line-under-mexican-cartel-case-after-five-years-on-probation-idUSKBN1E50YA https://www.reuters.com/article/us-hsbc-usa/hsbc-draws-line-... https://inhomelandsecurity.com/hsbc-cartel-money-laundering/ https://inhomelandsecurity.com/hsbc-cartel-money-laundering/ https://www.rollingstone.com/politics/news/outrageous-hsbc-settlement-proves-the-drug-war-is-a-joke-20121213 https://www.rollingstone.com/politics/news/outrageous-hsbc-s... (edit: grammar/spelling fixes)

fulafel 9y ago

"Since the U.S. dollar dominates international transactions, banning U.S. correspondent banking relationships with ABLV amounts to shutting it out of the global financial network" How does this figure? Anyone can buy/sell USD on the global FX market, and so pay/accept USD, no?

simonh 9y ago
It they can't do any deals or transactions denominated in dollars with any other financial institutions with links to the US, which is most of them. That also means the ones left that they can deal with can pretty much charge whatever they like.
wtfstatists 9y ago
No because to really hold USD, your bank would need its own account on FedWire [1] (USD's Real Time Gross Settlement) in which money is legally guranteed. Alternatively your bank can have an account with a bank (called Correspondent Bank) that have account on FedWire. Any more indirections would be too risky. If your bank has neither, then no other bank would talk to your bank over SWIFT/CHIPS/RIPPLE/etc, making your bank basically banned from USD banking. Usually and and in this case, even accusations or investigation of money-laundering/etc would make a CB to derisk [2][3] and proactively cancel account of accused bank or CB would risk access to FedWire. This is how USG was able to force FATCA over the world. [1] https://www.federalreserve.gov/paymentsystems/fedfunds_about.htm https://www.federalreserve.gov/paymentsystems/fedfunds_about... [2] https://google.com/search?q=correspondent+bank+de+risking https://google.com/search?q=correspondent+bank+de+risking [3] https://www.americanexpress.com/us/content/foreign-exchange/articles/fedwire-us-dollar-in-international-payments/ https://www.americanexpress.com/us/content/foreign-exchange/...
- twic 9y ago
  > Any more indirections would be too risky. I'm not sure this is quite true. There is a thriving and legitimate market in "eurodollars", deposits denominated in US dollars but held outside the US, and specifically beyond the reach of US authorities. The question is whether you would be able to make much use of such deposits without US cooperation. It would definitely be difficult, but it might be possible. I am by no means an expert on this, but i came across an interesting case from the '80s - Libyan Arab Foreign Bank v Bankers Trust Co. Section 3.4 of this book describes it: https://books.google.co.uk/books/about/Freezing_Assets.html?id=34WwCwAAQBAJ&redir_esc=y https://books.google.co.uk/books/about/Freezing_Assets.html?... And there's a wider discussion here: http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1622&context=auilr http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?a... The upshot is that a UK judge decided that it was possible to pay out a dollar balance held in London without involving the US. It seems there were several plausible ways to do it. Whether that's still true, i have no idea. Interesting stuff, anyway.

nraynaud 9y ago

I don’t see a lot of due process in this execution. Upholding the values of the constitution is only a week-end hobby?

sathackr 9y ago
Our government feels that the "all men" in "all men are created equal, that they are endowed by their Creator with certain unalienable rights" really just means US citizens. The courts have held over and over that our constitution does not protect the rights of non-citizens. That's why we can legally execute a 'terrorist' in another country with a missile fired from a drone without even so much as them being charged with a crime. With all the false convictions of US Citizens that make it through our "due process," I wonder how many of those extrajudicial executions were based on incorrect information? Rarely do they even want to respect the constitution for actual US citizens. The protections and rights granted are slowly being chipped away by the executive and legislative branches, and now even the judicial branch is becoming politicized.