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" You don't send an executive to jail because a guy several layers down did something wrong, and popular outrage feels the executive should, somehow, be personally and criminally responsible for that."

1. Just to be clear, they didn't put the anti money laundering people who were literally in charge of verifying compliance with these laws in jail either, even though they knew they were laundering money for the drug cartels. The government alleged, and HSBC never denied, that they had actual knowledge of what the money was being used for. It's not a case of "oh, well, i had no idea bob at the teller window was doing this".

This isn't "the guys several layers down did something wrong"

This is "We knew were laundering money for the drug cartels. We intentionally flouted the law (government's words) to keep it that way."

2. It's not "wrong", it's criminal. What HSBC did is criminal. They were charged criminally. This is a deferred prosecution agreement. They knew they were laundering money for drug cartels. "But even Taibbi can't seem to identify what precisely the executives are guilty of, an important prerequisite to prosecution in a nation governed by the rule of law." This isn't even close to right. You should try reading the charging documents that led to this settlement. The prosecutors make very clear what they are guilty of, and lay out a case that makes clear the executives knew exactly what was going on. They even created fake banking products to get around the law, too.

The entire setup was a sham from the start. The reason HSBC didn't deny everything is because publicly being fined and saying nothing about it was the condition on avoiding prosecution. Remember, the PATRIOT Act can give bankers 20 year jail sentences even if they did not know what was happening. Jailing innocent people from crimes committed by basically random other people is absurd and yet that is what Congress has put in place.

If your choice, as a banker, was to piss off a government hell-bent on making you a scapegoat and risk going in front of a jury of poor people who hate bankers, charged of violating a law it's impossible not to violate, and which carries a 20 year jail sentence, you would agree to a deal as well.

The US allegations were ridiculous anyway. They claimed HSBC "knew" there was money laundering taking place merely because money was moving from Mexico to America. I'm sure HSBC execs, having read newspapers and watched TV, were quite confident there was drug money in that stream. This is quite different to knowing precise account numbers of drug cartels with a high degree of certainty. I don't recall the latter being alleged, however.

35. Even when HSBC Mexico determined a relationship should be terminated, it often took years for the account to actually be closed. In December 2008, there were approximately 675 accounts pending closure based on suspicions of money laundering activity. Closure had been approved for 16 of those accounts in 2005, 130 in 2006, 172 in 2007, and 309 in 2008. All 675 of these accounts remained open into at least 2009, with transactions being actively conducted through them despite facing pending closure based on suspicion of money laundering activity.

36. Between 2004 and 2007, HSBC Mexico exported over $3 billion U.S. dollars per year to the United States through Banknotes. In November 2007, Banco de Mexico, the central bank of Mexico, expressed concerns about the volume of U.S. dollars exported by HSBC Mexico back to the United States. Specifically, Banco de Mexico wanted an explanation as to why HSBC Mexico’s U.S. dollar exports were significantly larger than its market share would suggest.

37. In February 2008, HSBC Mexico’s CEO met with the head of the CNBV and the head of Mexico’s financial intelligence unit, Unidad de Inteligencia Financiera (“UIF”). Again, the volume of HSBC Mexico’s U.S. dollar exports was raised as a concern. Specifically, HSBC Mexico’s CEO was told that law enforcement in Mexico and the United States were seriously concerned that the U.S. dollars being deposited at HSBC Mexico might represent drug trafficking proceeds. HSBC Mexico’s CEO was also told that Mexican law enforcement possessed a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money.

http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...

And the law makes the executives responsible for implementation of this, which they clearly did not do effectively. The executives are not guilty of an anti-drug law, but a money laundering law, and the liability is pretty clear. The current maximum sentence is 5 years, although the "Holding Individuals Accountable and Deterring Money Laundering Act" is trying to raise this to 20. All these types of regulation about money laundering and bribery have executive liability.

Please point me to the law that the executives broke that would send them to jail. Cross-reference it with the government's charges.

If you read the DOJ's side of things, HSBC is guilty of things like "we said Mexico is high-risk, HSBC disagreed and so failed to automatically monitor a bunch of transactions," in more legalistic language.

New York State Penal Law Charge 62. DANY alleges, and HSBC Holdings admits, that its conduct, as described herein, violated New York State Penal Law Sections 175.05 and 175.10, which make it a crime to, “with intent to defraud, . . . (i) make[ ] or cause[ ] a false entry in the business records of an enterprise [defined as any company or corporation] . . . or (iv) prevent[ ] the making of a true entry or cause the omission thereof in the business records of an enterprise.” It is a felony under Section 175.10 of the New York State Penal Law if a violation under Section 175.05 is committed and the person or entity’s “intent to defraud includes an intent to commit another crime or to aid or conceal the commission thereof.”

http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p...

Starting in the first para http://www.justice.gov/opa/documents/hsbc/dpa-attachment-a.p..., the DOJ says they have violated the Bank Secrecy Act https://en.wikipedia.org/wiki/Bank_Secrecy_Act which has punishments including imprisonment.

The Bank Secrecy act encapsulates hundreds of pages of law and regulations. Which part are you talking about?

You can't just link a law and say "it says somewhere here someone can go to prison for some reason, so I'm sure that bank executives should go to prison." The Wikipedia article's blurb about prison does not seem to cover HSBC's conduct, but it's also hopelessly vague.

The DOJ themselves said HSBC is in violation, therefore the point is made without the need for us lay readers to know the exact part.

???

The Bank Secrecy Act carries with it an enormous amount of different regulations and different laws and different penalties. The exact part is what you need to make your "point". If you can't produce it, no point has been made.

The DOJ hasn't bothered to produce any reason to throw executives in jail, and I bet you can't either. Blithe self-righteousness is not a reason. A vague reference to a multi-hundred-page set of laws and regulations is not a reason.

The DOJ hasn't bothered to produce any reason to throw executives in jail

New York State Penal Law Sections 175.05 and 175.10

edit - 175.10, which HSBC have admitted guilt to, is a class E felony in NY, which apparently has sentencing guidelines of up to four years in prison with a minimum of one year.

Ok, thanks for participating in our conversation

That could be real or it could be posturing. That's why we have a court system - to hash these kinds of things out.

It's not at all uncommon for prosecutors to say things like that and then not file charges because they know they can't get a conviction.

I am busy right now coding to go through in detail, but here [1] is an example of someone who was imprisoned under the BSA for "conspiring to fail to file currency transaction reports and failing to have effective AML and compliance programs", which certainly applies to HSBC.

[1] http://compliance.saiglobal.com/community/news/item/4420-che...

No, HSBC didn’t disagree. They initially agreed, then /executives/ at the bank said “this will reduce profitability, so we need to change our position”.

They are very much at fault.

We don’t need to cross-reference anything. You should be disproving things. Why? Because HSBC admitted guilt and liability.

How about basic decency? You have to admit that there is a parallel here with many "everyday" drug cases, and that the punishment of ordinary people in parallel situations is drastically disproportionate to the punishment of HSBC.

If you're a bank, your services will be used to launder money. It's guaranteed to happen. All you can do is implement controls to keep that activity below a certain threshold. And banks reasonably want to implement as few controls as they can get away with while complying with the law, because it costs them money to do so. Failure to implement sufficient controls for compliance is not tantamount to an intent to assist money laundering.

There's absolutely no parallel here to the situation of ordinary people. If you see that Joe Schmoe's bank account was used to launder money from a drug cartel, you can very reasonably infer that he intended to assist that cartel. There's no reasonable explanation that involves trying to save money or hassle on regulatory compliance issues. Those sorts of transactions don't just accidentally or incidentally happen to ordinary people.

It's extremely hard to send drug kingpins to jail, and these are people who are actually breaking the law.

I'm sure, however, that the US government can try to prosecute mid-level HSBC managers and maybe some random bank tellers in Jersey and Mexico and wherever. Somehow I doubt this is what the article author actually wants to happen.

"I'm sure, however, that the US government can try to prosecute mid-level HSBC managers and maybe some random bank tellers in Jersey and Mexico and wherever."

They are not even doing that. And given your view that the executives should not get done because of mid level managers being responsible, what do you think of the fact that they are not being held to account either? Or do you honestly believe that this money was laundered through HSBC with nobody at HSBC helping?

"You don't send an executive to jail because a guy several layers down did something wrong"

Why not? You PAY him based on what that guy several layers down does...

Because you send people to jail for committing crimes, actually doing things that violate the law. Simply being employed by a company to manage some lawbreaker isn't a crime.

And if you'd like to propose making it a crime, I'd encourage you to first think about how exactly it could be twisted - how to separate the really-morally-responsible the scapegoats, in advance, with nothing but legal language.

I think you're missing the point. The issue here is that we have two prosecution regimes at work: one for the banks which works by more or less the rules you propose, and one for "everyone else", which very much doesn't. Your idea of only prosecuting bank employees with direct connection to the crimes seems like cold comfort to all the people threatened with arrest, in prison (or hell, even shot) because of the activities of their husbands and roommates.

Strangely, libertarian hacker types tend not to come to their defense as quickly as they do bank executives.

Of course the outrage comes from the fact that corporate structures offer so many layers of plausible deniability. At the end of the day, we would have to be fools to believe that billions in money laundering or price fixing are happening at these banks orchestrated, as the executives would have us believe, by a small group of malevolent peons expertly covering their tracks. It's just common sense that lots of people know what's going on and turn a blind eye because it's good for business and there's virtually no chance it'll actually get pinned on them.

You can go to prison for being an accessory if it can be shown that you were consciously aware that the crime was going on but did not stop/report it, or that you not being consciously aware is due to gross negligence on your part.

In the US, something like this is already a crime under Sarbanes-Oxley.

I think it's to be expected that governments that live off taxes force companies, that receive large cash deposits or whose business it is to receive, store or transfer money, to identify those individuals and businesses whose money they receive, store or transfer.

I don't receive any cash payments and I don't make any cash payments in my business. I am not a financial institution. This year, the value of the transactions that I participated in was probably around 100 million euro or so, and a fraction of a percent of this went through my account or ended up on my account, and all of it came from and went to banks. Not a cent was received in cash. Not a cent was paid out in cash. Now, HSBC and other banks probably have billions flowing through their system every second and in the order of millions received in cash or paid out in cash every second. I think it's natural to burden a few thousand banks with these rules, and not millions of small businesses.

Banks don't have the same access to your clients that you do. Their fraud monitors are giant machine-learning racks of computers.

If one were to adopt the position that it is the responsibility of business to prevent fraud, well, you have a unique ability to do that that no other institution has. This is why I think your post is hypocrisy. Banks aren't lawyers, they don't know your clients like you do, and if you adopt the principle that "people should be responsible for the actions of their customers", you're going to have a significant amount of responsibility that nobody else can handle.

Lawyers should be responsible to their clients, not serve as an extra layer of tax informants. Governments already have hundreds of thousands in their employ. And please spare your hypocracy remarks for someone you know.

Lawyers should be responsible to their clients, not serve as an extra layer of tax informants.

I was under the impression this is how it worked eg. that lawyers' only responsibility are to their client. Otherwise you would get some kind of weird conflict of interest in every case.

Lawyers are partly agents of the government. The alternative would be to make private lawyering illegal and to require all lawyer-type work to be done at goverenment offices.

If one were to adopt the position that it is the responsibility of business to prevent fraud

Well, it is the responsibility of HSBC to prevent criminal fraud by HSBC, which is one of the charges they plead guilty to in their plea bargain.

>> You don't send an executive to jail because a guy several layers down did something wrong

First , they are responsible as managers like others said.

But we're talking about serious allegations of supporting terrorism. For a common citizen , any strong link to terrorism means some extra legal horrible torture . But for HSBC's managers , even repeated offenses and warnings mean nothing.

> and monitor all of its branches for criminal activity, and they basically did that--but not as much as the US demanded

I'm not convinced that it wasn't completely obvious. The Mexico unit shipped $7 Billion to the US unit. Why did Breuer call it "stunning failures of oversight"?

> You don't send an executive to jail because a guy several layers down did something wrong

So why are the bonuses of those execs being cut if they are not to blame? Again, why did Breuer call it "stunning failures of oversight"?

I'm also not convinced they won't use this as a horrible excuse to unnecessarily increase monitoring, while the entire thing was plainly visible under an existing system. I would like cash to stay private, can i really not have that without something like this being invisible?

http://money.cnn.com/2012/12/10/news/companies/hsbc-money-la...

In America a company is considered an individual/has a social security number correct?

Then you should be able to seize that individuals assets and while you can't send a company to jail you can bankrupt it.

If we're going to consider all companies as people then all laws should be applied to said people.

> In America a company is considered an individual/has a social security number correct?

No, in America (as everywhere else corporations exist, since this is the very definition of a corporation) a corporation is considered a legal person (that is, an entity subject to legal process in its own identity). In America, corporations have Tax ID numbers, which serve (for tax purposes, though not for Social Security itself) a purpose similar to Social Security numbers.

Well, ok, then what do you do with all the money sitting in deposits in the bank? Just mail a check back to people?

This is why the executives should be criminally chargeable. Banks are systemically important, but the executives are not.

> Well, ok, then what do you do with all the money sitting in deposits in the bank?

There's a couple ways you could handle a "corporate death sentence" applied to a bank: 1. You could treat it as if the bank had failed completely -- all assets are forfeited, but customers receive refunds on insured (e.g., covered by FDIC) accounts only up to the amount insured. This would create some risk for large depositors, which could be considered bad, or could be considered good as it would encourage large depositors to take an active interest in how banks are run which would create pressure on behavior which would reduce the likelihood of needing to impose sanctions.

2. You could treat it as a facilitated sale of the corporation itself -- either in one unit or split into pieces with different buyers -- with any proceeds going to government rather than the shareholders.

In that case, care of the various customer accounts should be sold off to another bank.