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HSBC's Money Laundering Scandal (2022)

165 points by vinnyglennon 4y ago

metadat 4y ago
> In this case, HSBC provided money-laundering services of more than $881 million to various drug cartels including Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel. This included bulk movements of cash from the bank's Mexican unit to the U.S., with little or no oversight of the transactions. It also conducted transactions with Iran, removing references to the country in an effort to conceal them. Only $881m? Isn't that relative chump change given the size and scale of these ultra large global banks? I find it surprising they thought it was worth the risk, though humans being short-sighted is a tale as old as time.
- albntomat0 4y ago
  It's possible this was started by some sub-org within HSBC, where 881M would be a large fraction of that org's size. The management layer above them then doesn't look too deeply, or ensure prior compliance procedure, while promoting and giving bonuses to those who hit high numbers.
  - bitcharmer 4y ago
    This is exactly how these things happen. In an organisation that employs quarter of a million employees it's impossible to have perfect transparency and controls everywhere. At this scale you just have to trust that people below you do the right thing. That's not to say there should be no criminal charges for individuals. Just explaining how this transpired.
    - mnau 4y ago
      It's responsibility of the CEO/BoD to ensure compliance. At that size and in that market, compliance departments are huge. We get regular audits of our work by an outside company. The exact auditing company rotate to ensure no incompetence/cronyism hides something. As the article states: > Indeed, prior to 2010 when the OCC cited the bank for many AML deficiencies—including a huge backlog of unreviewed accounts and failure to file Suspicious Activity Reports (SARs)—for the previous six years the agency failed to take any enforcement action against the bank
    - rqtwteye 4y ago
      If the big guys aren’t able to be responsible for bad things they also shouldn’t take responsibility for good things and not get their big paychecks. In the end if an organization is too big to be controlled and to take responsibility it shouldn’t exist and be broken up.
- gadders 4y ago
  These aren't business decisions taken to corner the money laundering market for Mexican cartels. It's more like Mexican cartels try all the banks to see which ones they can launder money through, and when they find one with poor controls that allow it they double-down on using that bank until their activity is stopped. Maybe at the country level they were happy with the transaction fees, but I would be surprised if it went any higher than that and certainly wouldn't be worth the risk.
  - fogforthought93 4y ago
    Do you have a source for the claim that drug cartels "try all the banks to see which ones they can launder money through"? I don't believe that's how it works at all. If you read, for example Drug Cartels Do Not Exist by Oswaldo Zavala, you'll see that this money is fundamental to how global finance operates. Drug money provided the necessary liquidity to keep the world finance system from crashing in '08. It's the main event, not a sideshow.
    - loeg 4y ago
      That is an exceptionally contrarian claim.
      - fogforthought93 4y ago
        Which one? Back up what you say. 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.
    - fmajid 4y ago
      For HSBC I doubt it. But I remember seeing a map of all the branches the defunct BCCI bank had, and they had something like 10x more branches in Colombia than in the US (this was a Pakistani Bank). They went under a few years later.
- dankboys 4y ago
  One of the key bits is that the cartel worked out the OFAC check by HSBC was shitty so could add spaces etc to bypass it. It wasn't a conscious decision, but a failure of their process.
- deleted 4y ago
  [deleted]
binarymax 4y ago
If nobody goes to jail, and the bank retains its licenses, then the fine is meaningless no matter how large. The fine is just seen as a poor investment, which is common in finance. They lost money, and move on to the next investment. People need to go to jail for these transgressions, otherwise there is little disincentive.
- mirekrusin 4y ago
  Who said poor investment? $1.9 billion is just small cut on return to pay, no?
  - dan-robertson 4y ago
    What was their return here? It looks like they were mostly transmitting money and doing currency exchange on <$1B. They’d surely make at most few percent on that, so much less than the fine. Did I misunderstand what the numbers in the article meant? Maybe they are suspected to have facilitated much more laundering that couldn’t be proven, but that would need to be approaching $100B for them to break even. I guess the actual return was having a smaller compliance department (not gonna save you $2B though) and getting more business due to lax controls making onboarding easier (I find it hard to believe that the advantage would make them $2B though).
- deleted 4y ago
  [deleted]
ectopod 4y ago
Wachovia laundered more and received a much smaller fine. https://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-gangs https://www.theguardian.com/world/2011/apr/03/us-bank-mexico...
jalapenos 4y ago
The unfortunate outcomes of these events is that, like a ratchet, it just gets harder and harder for ordinary citizens to go about their lives. It used to be that you could just walk into a bank and open an account on the spot. And it's still like that in many developing countries. It's now at the point that just having a bank account is becoming an asset in itself. It's an increasingly major process to open one, and the sense of certainty that your money is actually safe there, and you won't wake up one day to see your money frozen, declines every year that passes. This goes doubly if you're a foreigner. The amount of delays and paperwork I've had to deal with to have and maintain a bank account is just ridiculous. At some point they're going to need personal attestations from your 12 closest of kin, and a blood sample. And yet what difference has it all made? With all the KYC nonsense that we all now have to wade through, you still hear regular news of huge successful money laundering operations happening in developed countries.
- ur-whale 4y ago
  I agree with you very much. And you're not even touching the other part, which is that when you get in the cross-hair of the authorities (even if they happen to have a legitimate reason, which more often than not, they don't) your money can cease to be yours in the blink of an eye, leaving you with absolutely no means to defend yourself. We need far better legal protection for our assets than what currently exist in most so-called civilized countries. I would go as far as saying that the right to protect your assets from anyone is as deeply important than the right to free speech. And this is why crypto, in spite of all its purported shortcomings, holds such a deep gut appeal to very many people: at an instinctive level, they can feel it's the last resort to protecting your freedom from the predatory institutions that are supposed to be protecting them.
  - csomar 4y ago
    > cross-hair of the authorities (even if they happen to have a legitimate reason, which more often than not, they don't) your money can cease to be yours in the blink of an eye, leaving you with absolutely no means to defend yourself. It's worse than that. Fintech can freeze your money at their sole discretion. It's a puzzle to get the money unfrozen. My guess is that banks will be next, although they seem to do better now. But this practice is protected by the law.
dig1 4y ago
What banks are doing is "a regular cycle" of modern capitalism (although this sounds like nonsense) - greed. This time was HSBC, yesterday was Deutsche, and tomorrow, who knows. I'd suggest reading a light book from Yanis Varoufakis called "Talking to My Daughter About the Economy: or, How Capitalism Works--and How It Fails" [1], where he explains how this cycle fuels the synergy of a modern economy, capitalism, and politics. [1] https://www.amazon.com/Talking-Daughter-About-Economy-Works-ebook/dp/B076H4WMY1?ref_=ast_author_dp https://www.amazon.com/Talking-Daughter-About-Economy-Works-...
- cscurmudgeon 4y ago
  > What banks are doing is "a regular cycle" of modern capitalism (although this sounds like nonsense) - greed. This is not capitalism though. Like True socialism/communism, True Capitalism has never been tried. This is all crony capitalism with state protection.
  - chaostheory 4y ago
    Agreed. Also if people are going to constantly bring up late stage capitalism, we should also talk about late stage socialism. Late stage capitalism tends to happen more often and much sooner.
    - fmajid 4y ago
      And late-stage socialism ends up with 50M dead as under Stalin or Mao. Pol Pot tried his best to keep up, but he just didn't have that many Cambodians available to murder.
specialist 4y ago
Asking because I don't know how to find out... Which large banks are scandal free? I don't mean perfidy, like the 2009 mortgage crisis or LIBOR or using bail out money for bonuses or helping clients with tax avoidance. I mean straight up no doubt illegal and criminal stuff. Laundering, bribes, violating sanctions, and so forth.
- rqtwteye 4y ago
  There companies are simply too big. If they were smaller you could just shut down the offending company which then would make others pay more attention.
- rr808 4y ago
  I think you also have to ask are the regulators really finding real crimes or prosecuting grey areas that will win lots of money out of politically unpopular companies. New York makes a lot of money out of these fines which they can use for whatever they want.
noNothing 4y ago
Many years ago I did some work at a large race track and they were very concerned about money laundering. They worked closely with the local authorities to recognize any potential issues. I guess it all depends on the companies leaders as to what they want to risk. There are many opportunities to be complicit. Illegal exports, selling customer information, aiding money laundering, ... It seems wrong that petty criminals server harsher penalties than corporate leaders (or politicians) even though the corporate leaders commit worse crimes.
- luckylion 4y ago
  > I guess it all depends on the companies leaders as to what they want to risk. That's my experience as well. I've never worked in banking, but I've worked with igaming companies before, and some are basically ignoring regulation and will just stop something if a regulator catches them while others are 100% by the book. I've once asked the COO of a fully compliant company why they're competing with their hands tied behind their back and his reply was simply "because I don't want to go to jail". I'm guessing the folks at other companies had a different risk-reward analysis.
photochemsyn 4y ago
Why aren't bankers who launder billions for drug cartels given the kind of multi-decade federal prison sentences that 25-yr-old kids smuggling a few kilos of cocaine from Mexico to the United State are? It certainly makes it look like outfits like the FBI and DEA are little more than the enforcement arms of an organized white-collar crime cartel operating out of Wall Street offices, doesn't it? Amusingly James Comey (future FBI chief) got an 'advisory legal job' with HSBC after this scandal, which certainly looks like payola. Maybe bank robbers could also get out of prison time by hiring ex-FBI agents to advise them on how to not rob banks anymore? And yes, you can still find all the cocaine or fentanyl or methamphetamine you want with ease in any city in the USA, and it's still being shipped by the cartels, and they're still laundering the profits through the banking system and the real estate property markets, same as they've been doing since the 1980s at least.
- credit_guy 4y ago
  > Why aren't bankers who launder billions for drug cartels given the kind of multi-decade federal prison sentences You mean like these 35 guys who went to prison? Including one who went for 23 years? [1] https://money.cnn.com/2016/04/28/news/companies/bankers-prison/index.html https://money.cnn.com/2016/04/28/news/companies/bankers-pris...
  - buitreVirtual 4y ago
    This CNN article is about recovery fund fraud, not money laundering, and more importantly it highlights that only middle to small bank executives, and only lower level executives at too-big-to-fail banks, were punished.
- josu 4y ago
  It is complicated, for many reasons. A very important one is that responsibility is very diluted. - A bank executive opens an account to a seemingly legit company. - The compliance department OKs the account opening. - A bank teller receives 50k USD in cash every month. - Another teller receives another 50k USD in cash every month. - The head of the branch doesn't report strange activity. - The AML system by the bank don't detect anything strange. ... Every one of those steps, and many more, are needed for this kind of operation. Who do you send to prison? Do you make the CEO responsible even though she probably had no idea that this was going on? Or do you send the bank teller to prison, who was just doing her job, and maybe even threatened by the cartels? Even if the branch manager was getting paid by the cartels in order to not file AML reports, the payments were definitely happening in cash, so the conviction would have to be made based on eye-witnesses rather than an actual paper trail (good luck with that). Another important thing is that if you look at the report, they blame HSBC for failing to properly monitor the transactions, framing the institution more as a victim than an accomplice of the cartels. So in reality, it's the cartels doing the money laundering, the bank is just a gear in the whole system.
marcopicentini 4y ago
Someone has to suggest a book about how money laundering works?
- jamhan 4y ago
  "Reference guide to anti-money laundering and combating the financing of terrorism" (2003): https://documents.worldbank.org/en/publication/documents-reports/documentdetail/982541468340180508/reference-guide-to-anti-money-laundering-and-combating-the-financing-of-terrorism https://documents.worldbank.org/en/publication/documents-rep...
ttctciyf 4y ago
According to a Guardian article[1] from 2012, when HSBC copped its $1.9bn settlement for what appears to be its knowing involvement in narco-terrorism, the bank duly expressed contrition and consented to "install an independent monitor to assess reformed internal controls." The monitoring was part of a five year "deferred prosecution agreement" with the DoJ which allowed to bank to avoid actual criminal prosecution and so continue to operate in the US unhindered. Later, in 2021, the Guardian reported[2] that HSBC became aware as early as 2016 of a money laundering network "involving 92 HSBC Hong Kong accounts that received $4.2bn worth of payments between 2014 and 2017": > The bank, which is headquartered in London, would have been expected to disclose the information to an independent monitor brought in by the US Department of Justice (DoJ) in 2012, when criminal proceedings were deferred on condition the bank reform its anti-money laundering checks. However, while anonymous monitoring team members told the Guardian they had heard nothing of the $4.2bn network, HSBC remained coy: > HSBC said in a statement that it was illegal to disclose information it had shared with government authorities, and said “specific discussions with our former monitor remain confidential”. In charge of monitoring HSBC's deferred prosecution agreement was one Lisa Osofsky, a compliance expert and investigator working for Exiger who'd spent three years with Goldman Sachs and seven with Control Risks[3]. Doubtless Osofsky's investigatory skills and robust approach to financial regulation were factors in her 2018 appointment as head of UK's "Serious Fraud Office" (UK's FCC, kind of). According to HSBC whistleblower Nicolas Wilson[4], as of July 2021 Osofsky was living with her husband in a £3.5m London flat "with an HSBC mortgage". 1: https://www.theguardian.com/business/2012/dec/11/hsbc-bank-us-money-laundering https://www.theguardian.com/business/2012/dec/11/hsbc-bank-u... 2: https://www.theguardian.com/business/2021/jul/28/hsbc-faces-questions-over-disclosure-of-alleged-money-laundering-to-monitors https://www.theguardian.com/business/2021/jul/28/hsbc-faces-... 3: https://en.wikipedia.org/wiki/Lisa_Osofsky https://en.wikipedia.org/wiki/Lisa_Osofsky 4: https://twitter.com/nw_nicholas/status/1420692450260172803 https://twitter.com/nw_nicholas/status/1420692450260172803
- jamhan 4y ago
  Linked from Nicolas Wilson's twitter, this video, about a Tory MP and her husband's stealing of GBP 203m of Government money for useless PPE at the beginning of the COVID crisis, is staggering: https://twitter.com/ByDonkeys/status/1621174752407851008 https://twitter.com/ByDonkeys/status/1621174752407851008 Edit: Here's the video on YouTube: https://youtu.be/Bkshh4jOzME https://youtu.be/Bkshh4jOzME
rr808 4y ago
Why is America even involved? Its Mexican branches of a British/Asian bank. Why do US regulators have to get their fingers in everything.
- AlbertCory 4y ago
  Read Red Card (about the soccer scandal). Almost everyone in the world uses a clearing operation so that the money passes through New York, if only for a millisecond. So they can usually find an excuse.
- detaro 4y ago
  Mexican branches, moving money to US branches. Don't want the US involved in your banking operations, don't do business in the US. (Of course you might find not being able to do many things involving USD inconvenient if you want to be a relevant bank)
erie 4y ago
I remember years ago, I had to help my friend in translation during an investigator for money laundering involving HSBC account he could not open, yet the bank later opener an account under his name- using his ID and documents he sent for the account without him knowing it, because we were told at the end that if they would call us again it meant my friend was guilty.
AlbertCory 4y ago
There's an episode of Better Call Saul where Mike Ehrmantrout launders his $200,000 through a shady company. He gives them the cash, they pay him $20,000 a month for "logistics consulting." He tells them "make it 'security consulting.' I don't know anything about logistics." So he's got a 1099 or W-2 for his money, he pays taxes on it, and it's all clean. How many no-show jobs like this exist? Or actual jobs at a 501(c)(3). You can start one, hire yourself and your "business associates" at salaries that are somewhat justifiable, spend 5-10% of the assets annually on legitimate charity work, and you're set. Of course, this doesn't deal as well with drug cartel-class amounts of money.
- zxcvbn4038 4y ago
  The Mexican cartels will buy winning lottery tickets, full value, cash up front. Then when authorities question the source of their income, oh the guy has a nice house because he won the lottery fourteen times, here is all the documentation, here are the bank records showing the reoccurring deposits. Oh, and it’s not his nice house, he rents it. The cars are all leased. Legitimate income, no assets, even pays taxes - your move Johnny Law.
  - AlbertCory 4y ago
    I hadn't heard of that. I know casinos had been a good way to launder money (buy $100,000 worth of chips, lose $5,000, cash out for $95,000), but I think they caught on to that.
    - zxcvbn4038 4y ago
      The best way today is to give the money to friends and family and then have them give it back to you as a gift. Gift income is legitimate, the IRS can’t go challenge the people and ask where they got the money to give to you.
      - riskpreneurship 4y ago
        IIRC you can only gift in the range of 5 figures/year/person.
motohagiography 4y ago
I can't help but think there is just a layer of party affiliated political power where corruption is a status signal, and you only ever face charges when you lose your position and political leverage. All the banks launder money, but only some fall into disfavour where their political corruption or compromise collateral gets called in and someone faces charges.
electric_mayhem 4y ago
Another one? Corporate death penalty needs to be a thing. Do bad business consistently, as HSBC has since basically the dawn of its existence, and get your corporate charter revoked. Corporations are cynical, self-aware entities. And some, like HSBC, are sociopaths and a blight on civilization.
- emmanuel_1234 4y ago
  > Another one? It's about the 2012 case.
- jesterson 4y ago
  > And some, like HSBC, are sociopaths and a blight on civilization. If you tend to think other banks are any better - there is a lot for you to discover my friend.
mavili 4y ago
HSBC must've only been "found out" because US gov didn't get their share. Anyone thinking other big banks are innocent are too naïve. Drugs, weapons, terrorism.. all major banks and US gov have their share in the gains, either financial or political.
- jesterson 4y ago
  Exactly this. In normal course of action populace don't get to hear anything, and some resources get redistributed in favourable way for parties involved (mostly 3-letter US agencies).
vishnugupta 4y ago
There's a Netflix documentary about this https://www.imdb.com/title/tt7909188/ https://www.imdb.com/title/tt7909188/
valcron1000 4y ago
Another reason to pick HSBC as my next bank.
resuresu 4y ago
A certain quote from a certain ex president comes to mind.
ineptech 4y ago
> Why Did These Transgressions Come About? > In the case of HSBC, cost-cutting as part of a wide-ranging restructuring of the bank - through selling unprofitable businesses and centralizing its global structure - took a toll on the bank's compliance department. Is this satire? Perhaps the reason the Sinaloa cartel sold all those drugs was because, in centralizing their organizational structure, they laid off the guy who reminds everyone to plant corn instead of coca.
- xyzelement 4y ago
  The nature of compliance is that you are supposed to guarantee that an employee or even a department or branch can't "go bad" and do things you are affirming you don't want to be doing. So I agree this is a compliance failure though there are more proximal causes obviously.
moistly 4y ago
HSBC exists because of Opium. It has always been the bank of the drug cartels. > HSBC was founded after the second of the Opium Wars, by which time the trade was already well established. The founders included several opium traders who recognised the profitable banking opportunities presented by the new market. https://taxjustice.net/2015/02/27/hsbc-and-the-worlds-oldest-drug-cartel/ https://taxjustice.net/2015/02/27/hsbc-and-the-worlds-oldest... They’ve been in the thick of it since forever, unrelentingly. https://www.cadtm.org/HSBC-the-bank-with-a-shameful-past https://www.cadtm.org/HSBC-the-bank-with-a-shameful-past https://unpublishedarticles.com/hsbc-hong-kong-shanghai-bank/ https://unpublishedarticles.com/hsbc-hong-kong-shanghai-bank...
LouisSayers 4y ago
I'm currently reading about money laundering facilitated by Australian banks in the book "The Lucky Laundry" by Nathan Lynch. Here are some recent anti-money laundering law breaches: * French bank BNP Paribas - fined almost $9 Billion in 2014 [1] * Commonwealth Bank - fined $700 Million in 2018. [2] * Westpac fined $1.3 Billion fine in 2020. [3] It's pretty bad, here are just a couple of examples of the types of things going on. In the case of Commonwealth Bank they knew people would literally sit outside ATMs stuffing money into machines until they were full, and they didn't do anything about it. In the case of Westpac, due to their lack of monitoring, essentially helped facilitate child abuse transactions [4]. The banks have also gone out of their way to avoid providing required SWIFT information by routing money around it (counteracting laws put in place to avoid for example transferring money to terrorist orgs). It doesn't sound like anyone from the banking industry got arrested (surprise surprise). In the book he also talks about how the Australian Real Estate industry is filled with laundered money and how it is helping to prop up the price of housing in Australia. I'm only halfway through so assume there might be more details on this in the second half of the book. 1) https://www.reuters.com/article/us-bnp-paribas-settlement-idUSKBN0F52HA20140701 https://www.reuters.com/article/us-bnp-paribas-settlement-id... 2) https://www.abc.net.au/news/2018-06-04/commonwealth-bank-pay-$700-million-fine-money-laundering-breach/9831064 https://www.abc.net.au/news/2018-06-04/commonwealth-bank-pay... 3) https://www.bellgully.com/insights/westpac-agrees-to-au-1-3-billion-penalty-for-aml-breaches-what-nz-financial-institutions-need-to-know/ https://www.bellgully.com/insights/westpac-agrees-to-au-1-3-... 4) https://www.theguardian.com/australia-news/2019/nov/21/legal-breaches-allowed-westpac-customers-to-pay-for-child-sex-undetected-austrac-alleges https://www.theguardian.com/australia-news/2019/nov/21/legal...
- donavanm 4y ago
  Some “fun” reading from austrac and friends https://www.austrac.gov.au/sites/default/files/2019-07/sa-brief-real-estate_0.pdf https://www.austrac.gov.au/sites/default/files/2019-07/sa-br... “Shockingly” real estate agents and solicitors arent covered by AML/KYC here. I believe the same problems with opaque beneficial ownership extends to trusts as well. Other countries have similar challenges, but at least theres some duty to report etc. Criminals may be drawn to real estate as a channel to launder illicit funds due to the: » ability to buy real estate using cash » ability to disguise the ultimate beneficial ownership of real estate » relative stability and reliability of real estate investment » ability to renovate and improve real estate, thereby increasing the value. Criminals are also motivated to buy property for further profit or lifestyle reasons. Compared to other methods, money laundering through real estate – both residential and commercial – can be relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate.
TacticalCoder 4y ago
Official CIA factbook numbers: 3% to 5% of the world's entire fucking GDP is due to criminal activities [1]. Of course this money mostly all ends up in the real economy. [1] Numbers which do not account for what should be accounted as criminal activities but aren't because they're endorsed by the state.
thepawn1 4y ago
This DPA has already expired ( https://www.marketwatch.com/story/doj-seeks-to-end-hsbc-deferred-criminal-charges-2017-12-11 https://www.marketwatch.com/story/doj-seeks-to-end-hsbc-defe... ) . . And HSBC has already had another that was enforced and expired already on tax evasion though it's Swiss private bank.

165 points by vinnyglennon 4y ago

> In this case, HSBC provided money-laundering services of more than $881 million to various drug cartels including Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel. This included bulk movements of cash from the bank's Mexican unit to the U.S., with little or no oversight of the transactions. It also conducted transactions with Iran, removing references to the country in an effort to conceal them. Only $881m? Isn't that relative chump change given the size and scale of these ultra large global banks? I find it surprising they thought it was worth the risk, though humans being short-sighted is a tale as old as time.

albntomat0 4y ago
It's possible this was started by some sub-org within HSBC, where 881M would be a large fraction of that org's size. The management layer above them then doesn't look too deeply, or ensure prior compliance procedure, while promoting and giving bonuses to those who hit high numbers.
- bitcharmer 4y ago
  This is exactly how these things happen. In an organisation that employs quarter of a million employees it's impossible to have perfect transparency and controls everywhere. At this scale you just have to trust that people below you do the right thing. That's not to say there should be no criminal charges for individuals. Just explaining how this transpired.
  - mnau 4y ago
    It's responsibility of the CEO/BoD to ensure compliance. At that size and in that market, compliance departments are huge. We get regular audits of our work by an outside company. The exact auditing company rotate to ensure no incompetence/cronyism hides something. As the article states: > Indeed, prior to 2010 when the OCC cited the bank for many AML deficiencies—including a huge backlog of unreviewed accounts and failure to file Suspicious Activity Reports (SARs)—for the previous six years the agency failed to take any enforcement action against the bank
  - rqtwteye 4y ago
    If the big guys aren’t able to be responsible for bad things they also shouldn’t take responsibility for good things and not get their big paychecks. In the end if an organization is too big to be controlled and to take responsibility it shouldn’t exist and be broken up.
gadders 4y ago
These aren't business decisions taken to corner the money laundering market for Mexican cartels. It's more like Mexican cartels try all the banks to see which ones they can launder money through, and when they find one with poor controls that allow it they double-down on using that bank until their activity is stopped. Maybe at the country level they were happy with the transaction fees, but I would be surprised if it went any higher than that and certainly wouldn't be worth the risk.
- fogforthought93 4y ago
  Do you have a source for the claim that drug cartels "try all the banks to see which ones they can launder money through"? I don't believe that's how it works at all. If you read, for example Drug Cartels Do Not Exist by Oswaldo Zavala, you'll see that this money is fundamental to how global finance operates. Drug money provided the necessary liquidity to keep the world finance system from crashing in '08. It's the main event, not a sideshow.
  - loeg 4y ago
    That is an exceptionally contrarian claim.
    - fogforthought93 4y ago
      Which one? Back up what you say. 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.
  - fmajid 4y ago
    For HSBC I doubt it. But I remember seeing a map of all the branches the defunct BCCI bank had, and they had something like 10x more branches in Colombia than in the US (this was a Pakistani Bank). They went under a few years later.
dankboys 4y ago
One of the key bits is that the cartel worked out the OFAC check by HSBC was shitty so could add spaces etc to bypass it. It wasn't a conscious decision, but a failure of their process.
deleted 4y ago
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binarymax 4y ago

If nobody goes to jail, and the bank retains its licenses, then the fine is meaningless no matter how large. The fine is just seen as a poor investment, which is common in finance. They lost money, and move on to the next investment. People need to go to jail for these transgressions, otherwise there is little disincentive.

mirekrusin 4y ago
Who said poor investment? $1.9 billion is just small cut on return to pay, no?
- dan-robertson 4y ago
  What was their return here? It looks like they were mostly transmitting money and doing currency exchange on <$1B. They’d surely make at most few percent on that, so much less than the fine. Did I misunderstand what the numbers in the article meant? Maybe they are suspected to have facilitated much more laundering that couldn’t be proven, but that would need to be approaching $100B for them to break even. I guess the actual return was having a smaller compliance department (not gonna save you $2B though) and getting more business due to lax controls making onboarding easier (I find it hard to believe that the advantage would make them $2B though).
deleted 4y ago
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ectopod 4y ago

Wachovia laundered more and received a much smaller fine. https://www.theguardian.com/world/2011/apr/03/us-bank-mexico-drug-gangs https://www.theguardian.com/world/2011/apr/03/us-bank-mexico...

jalapenos 4y ago

The unfortunate outcomes of these events is that, like a ratchet, it just gets harder and harder for ordinary citizens to go about their lives. It used to be that you could just walk into a bank and open an account on the spot. And it's still like that in many developing countries. It's now at the point that just having a bank account is becoming an asset in itself. It's an increasingly major process to open one, and the sense of certainty that your money is actually safe there, and you won't wake up one day to see your money frozen, declines every year that passes. This goes doubly if you're a foreigner. The amount of delays and paperwork I've had to deal with to have and maintain a bank account is just ridiculous. At some point they're going to need personal attestations from your 12 closest of kin, and a blood sample. And yet what difference has it all made? With all the KYC nonsense that we all now have to wade through, you still hear regular news of huge successful money laundering operations happening in developed countries.

ur-whale 4y ago
I agree with you very much. And you're not even touching the other part, which is that when you get in the cross-hair of the authorities (even if they happen to have a legitimate reason, which more often than not, they don't) your money can cease to be yours in the blink of an eye, leaving you with absolutely no means to defend yourself. We need far better legal protection for our assets than what currently exist in most so-called civilized countries. I would go as far as saying that the right to protect your assets from anyone is as deeply important than the right to free speech. And this is why crypto, in spite of all its purported shortcomings, holds such a deep gut appeal to very many people: at an instinctive level, they can feel it's the last resort to protecting your freedom from the predatory institutions that are supposed to be protecting them.
- csomar 4y ago
  > cross-hair of the authorities (even if they happen to have a legitimate reason, which more often than not, they don't) your money can cease to be yours in the blink of an eye, leaving you with absolutely no means to defend yourself. It's worse than that. Fintech can freeze your money at their sole discretion. It's a puzzle to get the money unfrozen. My guess is that banks will be next, although they seem to do better now. But this practice is protected by the law.

dig1 4y ago

What banks are doing is "a regular cycle" of modern capitalism (although this sounds like nonsense) - greed. This time was HSBC, yesterday was Deutsche, and tomorrow, who knows. I'd suggest reading a light book from Yanis Varoufakis called "Talking to My Daughter About the Economy: or, How Capitalism Works--and How It Fails" [1], where he explains how this cycle fuels the synergy of a modern economy, capitalism, and politics. [1] https://www.amazon.com/Talking-Daughter-About-Economy-Works-ebook/dp/B076H4WMY1?ref_=ast_author_dp https://www.amazon.com/Talking-Daughter-About-Economy-Works-...

cscurmudgeon 4y ago
> What banks are doing is "a regular cycle" of modern capitalism (although this sounds like nonsense) - greed. This is not capitalism though. Like True socialism/communism, True Capitalism has never been tried. This is all crony capitalism with state protection.
- chaostheory 4y ago
  Agreed. Also if people are going to constantly bring up late stage capitalism, we should also talk about late stage socialism. Late stage capitalism tends to happen more often and much sooner.
  - fmajid 4y ago
    And late-stage socialism ends up with 50M dead as under Stalin or Mao. Pol Pot tried his best to keep up, but he just didn't have that many Cambodians available to murder.

specialist 4y ago

Asking because I don't know how to find out... Which large banks are scandal free? I don't mean perfidy, like the 2009 mortgage crisis or LIBOR or using bail out money for bonuses or helping clients with tax avoidance. I mean straight up no doubt illegal and criminal stuff. Laundering, bribes, violating sanctions, and so forth.

rqtwteye 4y ago
There companies are simply too big. If they were smaller you could just shut down the offending company which then would make others pay more attention.
rr808 4y ago
I think you also have to ask are the regulators really finding real crimes or prosecuting grey areas that will win lots of money out of politically unpopular companies. New York makes a lot of money out of these fines which they can use for whatever they want.

noNothing 4y ago

Many years ago I did some work at a large race track and they were very concerned about money laundering. They worked closely with the local authorities to recognize any potential issues. I guess it all depends on the companies leaders as to what they want to risk. There are many opportunities to be complicit. Illegal exports, selling customer information, aiding money laundering, ... It seems wrong that petty criminals server harsher penalties than corporate leaders (or politicians) even though the corporate leaders commit worse crimes.

luckylion 4y ago
> I guess it all depends on the companies leaders as to what they want to risk. That's my experience as well. I've never worked in banking, but I've worked with igaming companies before, and some are basically ignoring regulation and will just stop something if a regulator catches them while others are 100% by the book. I've once asked the COO of a fully compliant company why they're competing with their hands tied behind their back and his reply was simply "because I don't want to go to jail". I'm guessing the folks at other companies had a different risk-reward analysis.

photochemsyn 4y ago

Why aren't bankers who launder billions for drug cartels given the kind of multi-decade federal prison sentences that 25-yr-old kids smuggling a few kilos of cocaine from Mexico to the United State are? It certainly makes it look like outfits like the FBI and DEA are little more than the enforcement arms of an organized white-collar crime cartel operating out of Wall Street offices, doesn't it? Amusingly James Comey (future FBI chief) got an 'advisory legal job' with HSBC after this scandal, which certainly looks like payola. Maybe bank robbers could also get out of prison time by hiring ex-FBI agents to advise them on how to not rob banks anymore? And yes, you can still find all the cocaine or fentanyl or methamphetamine you want with ease in any city in the USA, and it's still being shipped by the cartels, and they're still laundering the profits through the banking system and the real estate property markets, same as they've been doing since the 1980s at least.

credit_guy 4y ago
> Why aren't bankers who launder billions for drug cartels given the kind of multi-decade federal prison sentences You mean like these 35 guys who went to prison? Including one who went for 23 years? [1] https://money.cnn.com/2016/04/28/news/companies/bankers-prison/index.html https://money.cnn.com/2016/04/28/news/companies/bankers-pris...
- buitreVirtual 4y ago
  This CNN article is about recovery fund fraud, not money laundering, and more importantly it highlights that only middle to small bank executives, and only lower level executives at too-big-to-fail banks, were punished.
josu 4y ago
It is complicated, for many reasons. A very important one is that responsibility is very diluted. - A bank executive opens an account to a seemingly legit company. - The compliance department OKs the account opening. - A bank teller receives 50k USD in cash every month. - Another teller receives another 50k USD in cash every month. - The head of the branch doesn't report strange activity. - The AML system by the bank don't detect anything strange. ... Every one of those steps, and many more, are needed for this kind of operation. Who do you send to prison? Do you make the CEO responsible even though she probably had no idea that this was going on? Or do you send the bank teller to prison, who was just doing her job, and maybe even threatened by the cartels? Even if the branch manager was getting paid by the cartels in order to not file AML reports, the payments were definitely happening in cash, so the conviction would have to be made based on eye-witnesses rather than an actual paper trail (good luck with that). Another important thing is that if you look at the report, they blame HSBC for failing to properly monitor the transactions, framing the institution more as a victim than an accomplice of the cartels. So in reality, it's the cartels doing the money laundering, the bank is just a gear in the whole system.

marcopicentini 4y ago

Someone has to suggest a book about how money laundering works?

jamhan 4y ago
"Reference guide to anti-money laundering and combating the financing of terrorism" (2003): https://documents.worldbank.org/en/publication/documents-reports/documentdetail/982541468340180508/reference-guide-to-anti-money-laundering-and-combating-the-financing-of-terrorism https://documents.worldbank.org/en/publication/documents-rep...

ttctciyf 4y ago

According to a Guardian article[1] from 2012, when HSBC copped its $1.9bn settlement for what appears to be its knowing involvement in narco-terrorism, the bank duly expressed contrition and consented to "install an independent monitor to assess reformed internal controls." The monitoring was part of a five year "deferred prosecution agreement" with the DoJ which allowed to bank to avoid actual criminal prosecution and so continue to operate in the US unhindered. Later, in 2021, the Guardian reported[2] that HSBC became aware as early as 2016 of a money laundering network "involving 92 HSBC Hong Kong accounts that received $4.2bn worth of payments between 2014 and 2017": > The bank, which is headquartered in London, would have been expected to disclose the information to an independent monitor brought in by the US Department of Justice (DoJ) in 2012, when criminal proceedings were deferred on condition the bank reform its anti-money laundering checks. However, while anonymous monitoring team members told the Guardian they had heard nothing of the $4.2bn network, HSBC remained coy: > HSBC said in a statement that it was illegal to disclose information it had shared with government authorities, and said “specific discussions with our former monitor remain confidential”. In charge of monitoring HSBC's deferred prosecution agreement was one Lisa Osofsky, a compliance expert and investigator working for Exiger who'd spent three years with Goldman Sachs and seven with Control Risks[3]. Doubtless Osofsky's investigatory skills and robust approach to financial regulation were factors in her 2018 appointment as head of UK's "Serious Fraud Office" (UK's FCC, kind of). According to HSBC whistleblower Nicolas Wilson[4], as of July 2021 Osofsky was living with her husband in a £3.5m London flat "with an HSBC mortgage". 1: https://www.theguardian.com/business/2012/dec/11/hsbc-bank-us-money-laundering https://www.theguardian.com/business/2012/dec/11/hsbc-bank-u... 2: https://www.theguardian.com/business/2021/jul/28/hsbc-faces-questions-over-disclosure-of-alleged-money-laundering-to-monitors https://www.theguardian.com/business/2021/jul/28/hsbc-faces-... 3: https://en.wikipedia.org/wiki/Lisa_Osofsky https://en.wikipedia.org/wiki/Lisa_Osofsky 4: https://twitter.com/nw_nicholas/status/1420692450260172803 https://twitter.com/nw_nicholas/status/1420692450260172803

jamhan 4y ago
Linked from Nicolas Wilson's twitter, this video, about a Tory MP and her husband's stealing of GBP 203m of Government money for useless PPE at the beginning of the COVID crisis, is staggering: https://twitter.com/ByDonkeys/status/1621174752407851008 https://twitter.com/ByDonkeys/status/1621174752407851008 Edit: Here's the video on YouTube: https://youtu.be/Bkshh4jOzME https://youtu.be/Bkshh4jOzME

rr808 4y ago

Why is America even involved? Its Mexican branches of a British/Asian bank. Why do US regulators have to get their fingers in everything.

AlbertCory 4y ago
Read Red Card (about the soccer scandal). Almost everyone in the world uses a clearing operation so that the money passes through New York, if only for a millisecond. So they can usually find an excuse.
detaro 4y ago
Mexican branches, moving money to US branches. Don't want the US involved in your banking operations, don't do business in the US. (Of course you might find not being able to do many things involving USD inconvenient if you want to be a relevant bank)

erie 4y ago

I remember years ago, I had to help my friend in translation during an investigator for money laundering involving HSBC account he could not open, yet the bank later opener an account under his name- using his ID and documents he sent for the account without him knowing it, because we were told at the end that if they would call us again it meant my friend was guilty.

AlbertCory 4y ago

There's an episode of Better Call Saul where Mike Ehrmantrout launders his $200,000 through a shady company. He gives them the cash, they pay him $20,000 a month for "logistics consulting." He tells them "make it 'security consulting.' I don't know anything about logistics." So he's got a 1099 or W-2 for his money, he pays taxes on it, and it's all clean. How many no-show jobs like this exist? Or actual jobs at a 501(c)(3). You can start one, hire yourself and your "business associates" at salaries that are somewhat justifiable, spend 5-10% of the assets annually on legitimate charity work, and you're set. Of course, this doesn't deal as well with drug cartel-class amounts of money.

zxcvbn4038 4y ago
The Mexican cartels will buy winning lottery tickets, full value, cash up front. Then when authorities question the source of their income, oh the guy has a nice house because he won the lottery fourteen times, here is all the documentation, here are the bank records showing the reoccurring deposits. Oh, and it’s not his nice house, he rents it. The cars are all leased. Legitimate income, no assets, even pays taxes - your move Johnny Law.
- AlbertCory 4y ago
  I hadn't heard of that. I know casinos had been a good way to launder money (buy $100,000 worth of chips, lose $5,000, cash out for $95,000), but I think they caught on to that.
  - zxcvbn4038 4y ago
    The best way today is to give the money to friends and family and then have them give it back to you as a gift. Gift income is legitimate, the IRS can’t go challenge the people and ask where they got the money to give to you.
    - riskpreneurship 4y ago
      IIRC you can only gift in the range of 5 figures/year/person.

motohagiography 4y ago

I can't help but think there is just a layer of party affiliated political power where corruption is a status signal, and you only ever face charges when you lose your position and political leverage. All the banks launder money, but only some fall into disfavour where their political corruption or compromise collateral gets called in and someone faces charges.

electric_mayhem 4y ago

Another one? Corporate death penalty needs to be a thing. Do bad business consistently, as HSBC has since basically the dawn of its existence, and get your corporate charter revoked. Corporations are cynical, self-aware entities. And some, like HSBC, are sociopaths and a blight on civilization.

emmanuel_1234 4y ago
> Another one? It's about the 2012 case.
jesterson 4y ago
> And some, like HSBC, are sociopaths and a blight on civilization. If you tend to think other banks are any better - there is a lot for you to discover my friend.

mavili 4y ago

HSBC must've only been "found out" because US gov didn't get their share. Anyone thinking other big banks are innocent are too naïve. Drugs, weapons, terrorism.. all major banks and US gov have their share in the gains, either financial or political.

jesterson 4y ago
Exactly this. In normal course of action populace don't get to hear anything, and some resources get redistributed in favourable way for parties involved (mostly 3-letter US agencies).

vishnugupta 4y ago

There's a Netflix documentary about this https://www.imdb.com/title/tt7909188/ https://www.imdb.com/title/tt7909188/

valcron1000 4y ago

Another reason to pick HSBC as my next bank.

resuresu 4y ago

A certain quote from a certain ex president comes to mind.

ineptech 4y ago

> Why Did These Transgressions Come About? > In the case of HSBC, cost-cutting as part of a wide-ranging restructuring of the bank - through selling unprofitable businesses and centralizing its global structure - took a toll on the bank's compliance department. Is this satire? Perhaps the reason the Sinaloa cartel sold all those drugs was because, in centralizing their organizational structure, they laid off the guy who reminds everyone to plant corn instead of coca.

xyzelement 4y ago
The nature of compliance is that you are supposed to guarantee that an employee or even a department or branch can't "go bad" and do things you are affirming you don't want to be doing. So I agree this is a compliance failure though there are more proximal causes obviously.

moistly 4y ago

HSBC exists because of Opium. It has always been the bank of the drug cartels. > HSBC was founded after the second of the Opium Wars, by which time the trade was already well established. The founders included several opium traders who recognised the profitable banking opportunities presented by the new market. https://taxjustice.net/2015/02/27/hsbc-and-the-worlds-oldest-drug-cartel/ https://taxjustice.net/2015/02/27/hsbc-and-the-worlds-oldest... They’ve been in the thick of it since forever, unrelentingly. https://www.cadtm.org/HSBC-the-bank-with-a-shameful-past https://www.cadtm.org/HSBC-the-bank-with-a-shameful-past https://unpublishedarticles.com/hsbc-hong-kong-shanghai-bank/ https://unpublishedarticles.com/hsbc-hong-kong-shanghai-bank...

LouisSayers 4y ago

I'm currently reading about money laundering facilitated by Australian banks in the book "The Lucky Laundry" by Nathan Lynch. Here are some recent anti-money laundering law breaches: * French bank BNP Paribas - fined almost $9 Billion in 2014 [1] * Commonwealth Bank - fined $700 Million in 2018. [2] * Westpac fined $1.3 Billion fine in 2020. [3] It's pretty bad, here are just a couple of examples of the types of things going on. In the case of Commonwealth Bank they knew people would literally sit outside ATMs stuffing money into machines until they were full, and they didn't do anything about it. In the case of Westpac, due to their lack of monitoring, essentially helped facilitate child abuse transactions [4]. The banks have also gone out of their way to avoid providing required SWIFT information by routing money around it (counteracting laws put in place to avoid for example transferring money to terrorist orgs). It doesn't sound like anyone from the banking industry got arrested (surprise surprise). In the book he also talks about how the Australian Real Estate industry is filled with laundered money and how it is helping to prop up the price of housing in Australia. I'm only halfway through so assume there might be more details on this in the second half of the book. 1) https://www.reuters.com/article/us-bnp-paribas-settlement-idUSKBN0F52HA20140701 https://www.reuters.com/article/us-bnp-paribas-settlement-id... 2) https://www.abc.net.au/news/2018-06-04/commonwealth-bank-pay-$700-million-fine-money-laundering-breach/9831064 https://www.abc.net.au/news/2018-06-04/commonwealth-bank-pay... 3) https://www.bellgully.com/insights/westpac-agrees-to-au-1-3-billion-penalty-for-aml-breaches-what-nz-financial-institutions-need-to-know/ https://www.bellgully.com/insights/westpac-agrees-to-au-1-3-... 4) https://www.theguardian.com/australia-news/2019/nov/21/legal-breaches-allowed-westpac-customers-to-pay-for-child-sex-undetected-austrac-alleges https://www.theguardian.com/australia-news/2019/nov/21/legal...

donavanm 4y ago
Some “fun” reading from austrac and friends https://www.austrac.gov.au/sites/default/files/2019-07/sa-brief-real-estate_0.pdf https://www.austrac.gov.au/sites/default/files/2019-07/sa-br... “Shockingly” real estate agents and solicitors arent covered by AML/KYC here. I believe the same problems with opaque beneficial ownership extends to trusts as well. Other countries have similar challenges, but at least theres some duty to report etc. Criminals may be drawn to real estate as a channel to launder illicit funds due to the: » ability to buy real estate using cash » ability to disguise the ultimate beneficial ownership of real estate » relative stability and reliability of real estate investment » ability to renovate and improve real estate, thereby increasing the value. Criminals are also motivated to buy property for further profit or lifestyle reasons. Compared to other methods, money laundering through real estate – both residential and commercial – can be relatively uncomplicated, requiring little planning or expertise. Large sums of illicit funds can be concealed and integrated into the legitimate economy through real estate.

TacticalCoder 4y ago

Official CIA factbook numbers: 3% to 5% of the world's entire fucking GDP is due to criminal activities [1]. Of course this money mostly all ends up in the real economy. [1] Numbers which do not account for what should be accounted as criminal activities but aren't because they're endorsed by the state.

thepawn1 4y ago

This DPA has already expired ( https://www.marketwatch.com/story/doj-seeks-to-end-hsbc-deferred-criminal-charges-2017-12-11 https://www.marketwatch.com/story/doj-seeks-to-end-hsbc-defe... ) . . And HSBC has already had another that was enforced and expired already on tax evasion though it's Swiss private bank.