How do you feel about HSBC being convicted of money laundering? Do you feel that they were wrongly convicted based on the original definition of the term?
If you hear only the government's story and the other side is gagged, the listener will always conclude the perp is guilty. You can dig in and find the other side if you like: I did. The case looks a lot less clear, then. For instance HSBC was accused of laundering lots of money for Mexican drug cartels. Most people think that means "knowingly laundering". It doesn't: the money in question actually came from remittances firms. The American's case was something like this: there's so much money being remitted across the border, there must be drug money in there. HSBC is moving money for remittances firms. Therefore HSBC must be moving drug money without knowing. Therefore their AML standards are too low, therefore they are money laundering.
As you can see, I am not sympathetic to this kind of logic or "justice". Certainly the US case would not have been successful in court under the original definition as they never presented evidence any kind of conspiracy inside HSBC to launder drug money. The allegations revolved entirely around HSBC not trying hard enough, which is not the same thing.
Actual convictions for anti-money laundering offences are very rare. This kind of fine-and-silence outcome is much more common.
The reasons are simple. The current situation is kind of like a Cuban missile crisis. It's very volatile and unstable. Every banker knows that every banker is guilty of some kind of AML offence, because it's impossible to work in finance and not be guilty. The laws are just that badly written. What's more, western governments know this too. Almost every big bank has been fined under AML laws in the past 20 years or so.
But American justice is extremely vicious (and it's in America where the whole idea of anti-money-laundering originated). Like many laws, AML offences can carry 20 year jail sentences.
If you mix 20 year sentences with "everyone is guilty" you have a situation that is like a minefield. If the government actually started prosecuting bankers under these laws, there's a risk they might win and that could be apocalyptic - it could trigger a collapse of the entire financial system as bankers exited the industry en-masse.
In the HSBC case, one part of the US Gov (either Treasury or DoJ, I forget which) actually did want to prosecute. The other part convinced them not to, using the above logic. The chance of successfully jailing a banker is high enough that they can't actually do so, lest it cause the industry to self destruct.
The parent comment may or may not be correct (I honestly don't know), but author makes it really, really clear what his logic is, and it's nothing like it.
If you came to such a conclusion, it means that you skimmed through the comments above in 2 seconds, and not even trying to understand what was actually written.
I see this as an absolute. I don't really see how it can be otherwise.
This is the justification that sievebrain used for the selective application of what he considers to be poor laws.
I say we need to enforce poor laws too, because otherwise it's rule by men, not laws.
HSBC was fined because it failed to follow the rules put in place to prevent money laundering. Often it completely failed to make any attempt to follow those rules. E.g.
"...The monitor’s findings described several incidents, among them one where an HSBC branch in Sinaloa, a Mexican state that has experienced much drug-related violence, opened a private-wealth account for a 19-year-old man who arrived with a bag containing thousands of dollars in cash. The man described himself as a shrimp farmer."
http://www.wsj.com/articles/hsbc-struggles-to-bring-money-la...
There was a consistent pattern of failing to flag, investigate, or report transactions that were clearly suspicious.
That's why HSBC was fined. There's no grey area here, and the laws aren't particularly onerous. They were simply ignored.
>it could trigger a collapse of the entire financial system as bankers exited the industry en-masse.
Considering the close association between banks and fraud/criminality, that would hardly be a bad thing.
So far in the UK we've had prosecutions for fraudulent mis-selling of payment protection insurance; fraudulent mis-selling of premium accounts; LIBOR rate fixing; forex rate fixing; and insider trading.
Last month DB settled out of court with traders who alleged - and provided evidence - of precious metal price fixing.
The entire financial industry is rotten to the core. It's the single biggest destroyer of genuine economic growth in the planetary economy, and it also has anti-democratic political influence which operates outside the usual constitutional checks and balances.
There is nothing remotely positive here. The industry needs to die, and it needs to be replaced by completely new structures and institutions that use the profit motive as an excuse for criminality in quite the same psychopathic ways.
Not quite. I said explicitly that all banks are guilty of violating AML laws, because it's impossible not to be guilty.
You then go ahead and prove my point: someone turned up with some cash, and gave an explanation of where he got it. The banker in question accepted the story and the monitor found it to be "clearly suspicious".
"Suspicious" is such a vague standard that nobody can ever comply with such laws. There will always be transactions that are debatable, grey area, or turn out to be suspicious in hindsight but weren't at the time. Your own example proves this: apparently if you ran a bank nobody would ever be able to open an account and deposit money there, which is a problem, because being able to do that is kind of the point of having banks.
The story you link to admits as such in the very next paragraph after the shrimp farmer quote:
Compliance officials who must decide whether a bank should open an account or extend a loan can face a tough job, having to make the call based on the movement of money through existing accounts or sketchy data such as local knowledge and material found online. Regulators want to see signs that compliance departments are at least flagging suspicious transactions and customers. That didn’t appear to happen in the Sinaloa matter.
Maybe people open accounts that way in this part of Mexico all the time? Heck, maybe the person who opened the account thought it was suspicious but was afraid of turning up inconveniently dead if he turned the guy down. It's very easy for Americans to sit around on their Aeron chair in nice safe Washington DC and criticise people on the front line of the drug war for not trying hard enough.
But I'm not sure I'm arguing with a reasonable person. Your response to "the banking system might collapse" is "that would hardly be a bad thing", which is a position so far out that I doubt you will ever change your mind. What's your intended alternative? Bitcoin?
That said, my focus in this thread has been on money laundering rules, not trading fraud.
First, failing to follow rules put in place to prevent money laundering is not itself money laundering. Just like failing to follow rules put in place to prevent traffic accidents is different than driving your car into someone.
Second, the true story is one degree removed even from what you say. A key element of the government's case against HSBC was that it classified Mexico as "standard or medium risk" when classifying it as high risk would have triggered additional controls intended to prevent money laundering: https://www.justice.gov/sites/default/files/opa/legacy/2012/... (pages 7-8). The government states that HSBC "should have known Mexico was high risk" based on various publications discussing money-laundering risks in Mexico.
HSBC was not an innocent party, but it was guilty of regulatory rather than criminal violations. It failed to put country X in risk category Y; it failed to adequately staff it's AML department, etc. For those regulatory violations, it paid a fine, which was the appropriate punishment.
Is all of the above just 'moving money for remittances firms'? Or is it the US govs propaganda, reprinted by the BBC?
Your comment just seems winding and lacking logic. First you argue that HSBC didn't really do anything wrong and then that the US gov didn't even want to prosecute them because they knew the consequences would be 'apocalyptic'. If these things are both true then why did HSBC settle out of court? Why did they publicly appologise? Why not just see the case through to save face and $1.9 billion.
The Americans took a novel position in that case: that because the payments were denominated in dollars and were processed by computers in New York, American sanctions should apply to foreign payments. They then proceeded to punish HSBC for "evading sanctions" that didn't actually exist. It did achieve one thing though: it sent a powerful message that US law is in fact international law.
Saying "Mexican banks should have been high risk instead of low risk" is the kind of subjective judgement call that highlighst my entire point. Maybe the high risk category was reserved for places like Congo or Nigeria or Pakistan, and Mexico - being a relatively stable state that engages in heavy trade with America - did not justify the same level of scrutiny as those.
My logic is very simple. The laws are so vague that any kind of activity can be retroactively labelled as 'suspicious' and thus illegal. But that is not the rule of law.
Your final paragraph shows you didn't understand what I wrote at all. HSBC is absolutely guilty of violating AML laws, as are all other banks, and if they went to court then a whole lot of bankers would have gone to prison for a long time ... just for engaging in the business of banking. This is not in the best interests of society because we then might find ourselves without banks, and neat though such a world might seem, we'd need an alternative first.
The public apology was a part of the plea bargain struck with the US Gov. They were forced to do it. You'd do the same if the alternative was spending the rest of your life rotting in jail.