HSBC moved vast sums of dirty money after paying record laundering fine

KYC compliance is already getting painful for ordinary bank customers. Please don't bring in more surveillance.

Could it be that the law here is just unreasonable and only the biggest players can afford to get away with breaking it? (likely for an additional premium)

Oh the banks are 100% in the wrong as they are fully aware what’s happening.

> They seem to know where the money is and how to get the cut.

How do you preserve such a knowledge in the institution through the years?

Probably has more to do with the fact that it is the only bank that operates pretty much everywhere on the planet. Even large international banks only have licenses in a handful of countries and post 2008 financial regulations have applied pressure to reduce that number.

Again the issue here is that the SAR’s were disclosed to the regulators if the regulator isn’t following up on them it’s not clear where the fault lies.

If HSBC wasn’t following the guidelines and covering this up yes jail them all, but this seems to have been a major regulatory failure.

I think stuff like the OP make this unclear to the layman. The reports that have been leaked are documents that banks are passing to law enforcement. They are evidence of banks attempting to stop crimes, not facilitating them.

The issue is that banks often have no idea themselves because they aren't actually law enforcement. I saw one SAR that actually referenced a random blogpost. And, as you say, it is a slippery slope. The only way to ensure that this never happens ever is to essentially bring the system to a standstill, and ask both law enforcement and regulators to approve every transaction (and even then, they probably won't get it right from the POV of the public all the time).

The example that I read was of a Ponzi scheme where HSBC moved money through accounts, they filed SARs...and yes, if you are a journalist it is easy to go back in time and say: "Oh, look...this ponzi scheme was so obvious, they must have known". Well no, they didn't know, they filed SARs, and waited until someone had actually been found guilty of a crime before acting as judge and jury themselves (which btw, was likely an investigation in which HSBC assisted).

The only foolproof way to launder money these days is to completely conceal your identity (not something a bank can do anything about) or corrupt someone at a financial institution (almost never happens, most large financial institutions have teams of people that track the movements and communications of people working in AML, both personal and business). The effectiveness of this system, given the amount of transactions, is astonishing.

Singapore has <15 murders per year. Their police force is a joke.

There are red flags at banks.

Offshore style banks like HSBC are more susceptible to this kind of stuff because they have less of a wider stake in the situation.

Also, with 'cross jurisdictional' stuff, then it gets easier to hider.

Another way of helping would be saying 'your business transactions in the US has to be transacted by a financial entity hosted in a regime with strong regulations and transparency with the US' kind of thing. As an example.

Also, consider that merely hosting the accounts for a company committing fraud is not fraud itself in much the same way that hosting a website or doing their cleaning, or leasing them a building isn't either.

This anti-AML post is silly - and aren't there suddenly a lot of them here?

> If 100% of flows go through banks and banks stop 99.99% of money laundering, that 0.01% is still billions.

Maths: that would make 10,000 billion = 10 trillion of cash laundered per year.

agreed 100%

When something is postured to 'benefit the every day people' you can bet it does the exact opposite

This, the fine was not big enough to impact their business to a meaningful degree.

If they're too big to prevent $2 trillion of laundered money, then they're too big to exist.

I didn't know this. Could you clarify?

It is effectively a press-driven tax. TPTB feel obligated to pretend to care if it gets too much attention, so some fines get issued and life goes on.

You can tell the types of finance crime apart by looking for personal liability. If there isn't any, it is effectively a tax with a performative aspect.

Mega banks are objects of the big state, without exception. They're used by the governments in the nations where they reside. That's true across Europe, it's true across Asia, and it's true in the US. The big banks, wherever you go, are extensions of power for the government in question. It's just as true in the UK as it is in Ukraine. They don't get swooped down on, for that very reason, the people in power have no interest in doing anything overly detrimental to their own arms of power. So usually at best what you'll get are some slaps on the wrist handed out, the powers that be don't particularly like slapping their own wrists.

JP Morgan, Wells Fargo, Bank of America, Citi, Goldman Sachs, Morgan Stanley, these are financial arms of the US Government. They help the government in countless ways, they do things the Fed or Treasury tells them to do, when they're told to. They assist the government with its funding processes, or with any agendas it might have (eg housing, or sanctions). And no doubt they occasionally do bad things at the behest of someone in government as well. They're amazing scapegoats too, everyone hates big banks, you can just point at them anytime you feel like it; no matter how dirty you are as a politician, you can always win some points by attacking big banks.

Could you be more specific? Are you talking about COVID, bailouts, HSBC, ...?

Fines like that would threaten economic stability. I don’t see them getting more than a slap on the wrist like before.

I think this is sort of punishment is like job security but at the level of governments and nation-states. If people in charge really want to shut something down, then it drops pretty fast.

Cynical-but-opportunitistic start-up idea: find the shortest path to becoming too big to fail.

Fines are a cost of doing business. If you are serious about stopping crime, identify the ring of conspirators and bring them before the jury.

> Then make the fines 50x more costly. Put them out of business.

If it were only so simple! But crime always finds a way.

Harsher penalties, three strike laws, and stop-and-frisk haven't stopped street-level crime, why should the white-collar equivalent do anything to stop finance opportunists from committing their crimes?

Also, it costs money to enforce. HSBC probably has an entire floor of well-compensated slimy lawyers ready to fight off enforcement.

Ever since the Panama papers story broke (https://en.wikipedia.org/wiki/Panama_Papers), it has seemed to me that the good-guys are profoundly out-matched when it comes to power and money.

I don't want to sound like I'm defending HSBC here, but it's important to acknowledge that the reason it's so hard to enforce these rules is that nobody else would go to prison at all. The obligation for banks to check whether their customers are running scams is quite unique; Microsoft for example isn't on the hook if a scammer makes their presentations in Powerpoint.

> Then make the fines 50x more costly. Put them out of business. Anyone else would go to prison for life.

That is over simplifying the situation.

First, you cannot just arbitrarily x50 the fines. That would put the bank out of business. You cannot jeopardize a whole business (and the customers savings) just for the behavior of some bad actors. The fine should be at an appropriate level to trigger strong incentives for the existence of a reasonable compliance layer.

Second, the relationship between the severity of the punishment and the crime rate is definitely non linear.

i.e. even at the highest possible severity (say, death penalty) there will be crimes committed. This has been demonstrated over and over again.

There is a number of reasons for this, but I think the most compelling is that crime is often not a well thought out plan, it's a slope.

Imagine the following situation:

You're walking in an empty street and spot a truck loading MacBooks from an Apple store. Truck looks legit, workers wear Apple uniforms. Upon looking at the guy filling the truck, he charmingly smiles back at you and explains that they are sending back last year models for refurbishing, and hands you one of the boxes saying "here mate, half of these will be recycled anyway".

That's what bribery in the real life look like. It happens in broad daylight, and with just enough credibility that your brain will try very hard to convince your rational self that the "good luck" is not illegal. It also places you in a situation where you have to give an answer quickly, during a potentially stressful or socially awkward situation.

If you read this from your office chair, it seems completely obvious that the guys are robbing an Apple store. And handing you a free MacBook in the process is really shady. After this gift accepted, it will be much harder for you to be 100% honest with a policeman asking questions on what happened.

But when placed in the real situation, your brain will try very hard to convince you that an abnormal situation is surely normal. The social anxiety of refusing the MacBook may also lead you to accept it without thinking, because you don't want the other person to think you believe they are robbers. You may also see some other people receiving the MacBooks too and that may reinforce the feeling that this is normal.

Bribery is all about the gentle slope of deviances. You will deal with people from respectable companies, with a good title. It will start with a lunch that they insist to pay, then it will be a good bottle of wine sent for christmas (how mindful), then a small irregularity in the account will be discussed over dinner in a fancy restaurant, you will be flattered to have such a good relationship with your client. You will feel like you're important and it's just the way business works in the high spheres. Next thing you know you will think you're some kind of entrepreneur doing business with them without necessarily really understanding what they are doing.

That slope is the very reason compliance rules often start at ridiculously low numbers. Most bankers with a reasonably actionable position will have a 6 figure salary. Yet the compliance rules will prevent any kind of gift higher than $50. You will definitely not bribe anyone with 50$, but it's enough to kickstart a slope of "I pay the restaurant bill, it's no big deal we don't count between us right?"

All in all, I'm not saying bribery is acceptable or anything like that. I just want to emphasize that when placed in certain situations of stress, social anxiety, etc, entering the "crime slope" may happen without the actor really having the time to make a rational, well thought out decision.