Why banks can't be punished

Although international banks are caught laundering money for drug cartels and terrorist groups, they can't be shut down or fined enough to make them not do it again, because US politicians need to continue doing business with those banks. They can't shut the bank down, ending their lobby re-election income, and move their accounts to other banks. When moving the accounts, they might be asked why which could be embarassing.


"The settlement had been widely expected following a report by the US Senate, published earlier this year, that was heavily critical of HSBC's money laundering controls.


The report alleged that:


  • HSBC in the US had not treated its Mexican affiliate as high risk, despite the country's money laundering and drug trafficking challenges
  • The Mexican bank had transported $7bn in US bank notes to HSBC in the US, more than any other Mexican bank, but had not considered that to be suspicious
  • It had circumvented US safeguards designed to block transactions involving terrorists drug lords and rogue states, including allowing 25,000 transactions over seven years without disclosing their links to Iran
  • Providing US dollars and banking services to some banks in Saudi Arabia despite their links to terrorist financing
  • In less than four years it had cleared $290m in "obviously suspicious" US travellers' cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business


The report suggested HSBC accounts in Mexico and the US were being used by drug barons to launder money.


BBC business editor Robert Peston said that as big as the $1.9bn penalty looks, it could have been much worse.


"HSBC has signed a Deferred Prosecution Agreement for breaches of the US Bank Secrecy Act, the Trading with the Enemy Act and assorted money laundering offences. This is in effect putting the bank on probation," he said.

"But if HSBC had been indicted for these offences, that would have meant that the US government and others could no longer have conducted business with it, which would have been humiliating and highly damaging.

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Comments (2)

  1. jwcj

    Just to let you know Wells Fargo Bank was just fined 14 million dollars for laundering money and they were made to surrender all information and assets of these accounts.

    June 24, 2013
    1. livelonger

      “Wachovia admitted it didn’t do enough to spot illicit funds in handling $378.4 billion for Mexican-currency-exchange houses from 2004 to 2007. That’s the largest violation of the Bank Secrecy Act, an anti-money-laundering law, in U.S. history — a sum equal to one-third of Mexico’s current gross domestic product. … Wells Fargo promised in a Miami federal courtroom to revamp its detection systems. Wachovia’s new owner paid $160 million in fines and penalties, less than 2 percent of its $12.3 billion profit in 2009.

      Miami-based American Express Bank International paid fines in both 1994 and 2007 after admitting it had failed to spot and report drug dealers laundering money through its accounts. Drug traffickers used accounts at Bank of America in Oklahoma City to buy three planes that carried 10 tons of cocaine, according to Mexican court filings.
      Federal agents caught people who work for Mexican cartels depositing illicit funds in Bank of America accounts in Atlanta, Chicago and Brownsville, Texas, from 2002 to 2009. Mexican drug dealers used shell companies to open accounts at London-based HSBC Holdings Plc, Europe’s biggest bank by assets, an investigation by the Mexican Finance Ministry found.
      the Mexican units of Banco Santander SA, Citigroup Inc. and HSBC
      The 1970 Bank Secrecy Act requires banks to report all cash transactions above $10,000 to regulators and to tell the government about other suspected money-laundering activity. Big banks employ hundreds of investigators and spend millions of dollars on software programs to scour accounts.
      No big U.S. bank — Wells Fargo included — has ever been indicted for violating the Bank Secrecy Act or any other federal law. Instead, the Justice Department settles criminal charges by using deferred-prosecution agreements, in which a bank pays a fine and promises not to break the law again
      Moving money is central to the drug trade — from the cash that people tape to their bodies as they cross the U.S.-Mexican border to the $100,000 wire transfers they send from Mexican exchange houses to big U.S. Banks.
      By law, the money changers have to demand identification from anyone exchanging more than $500. They also have to report transactions higher than $5,000 to regulators.
      The cartels get around these requirements by employing legions of individuals — including relatives, maids and gardeners — to convert small amounts of dollars into pesos or to make deposits in local banks. After that, cartels wire the money to a multinational bank.
      The Smurfs
      The people making the small money exchanges are known as Smurfs, after the cartoon characters.
      “They can use an army of people like Smurfs and go through $1 million before lunchtime,” says Jerry Robinette, who oversees U.S. Immigration and Customs Enforcement operations along the border in east Texas.
      Woods, a former Scotland Yard investigator, spotted illegible signatures and other suspicious markings on traveler’s checks from Mexican exchange companies, he said in a September 2008 letter to the U.K. Financial Services Authority. He sent copies of the letter to the DEA and Treasury Department in the U.S.
      Woods, 45, says his bosses instructed him to keep quiet and tried to have him fired, according to his letter to the FSA. In one meeting, a bank official insisted Woods shouldn’t have filed suspicious activity reports to the government, as both U.S. and U.K. laws require.
      Prosecutors have tried to halt money laundering at American Express Bank International twice. In 1994, the bank, then a subsidiary of New York-based American Express Co., pledged not to allow money laundering again after two employees were convicted in a criminal case involving drug trafficker Juan Garcia Abrego.
      In 1994, the bank paid $14 million to settle. Five years later, drug money again flowed through American Express Bank. Between 1999 and 2004, the bank failed to stop clients from laundering $55 million of narcotics funds, the bank admitted in a deferred-prosecution agreement in August 2007.
      Banks aren’t the only financial institutions that have turned a blind eye to drug cartels in moving illicit funds. Western Union Co., the world’s largest money transfer firm, agreed to pay $94 million in February 2010 to settle civil and criminal investigations by the Arizona attorney general’s office.
      “They are multinational businesses, after all,” says Gonzalez, as he slowly loads his revolver at his desk in his Mexico City office. “And they cannot work without a bank.”

      June 24, 2013
      1. livelonger

        Thousand of Smurfs to transfer small amounts of money to finance drug deals are everywhere.
        “Barclays faces pressure from Somali cash transfer firms
        Many Somalis rely on money sent from their relatives abroad

        The UK government is being urged to stop Barclays closing the last account in Somalia which allows its citizens overseas to send money back home.

        A group of aid practitioners said the service was a “lifeline” for an estimated 40% of the Somali population which rely on the transfers."
        “Sunrise Community Banks said it would halt the money transfers to comply with US laws on financing terror groups.

        US-based Somalis are believed to send about $100m back home each year – largely from Minnesota.

        The Somali government estimates that annual remittances are $2bn – about one-third of the country’s income.

        Some Minnesota-based ethnic Somalis have been accused of raising money and recruiting fighters for al-Shabab, a Somali militant group linked to al-Qaeda, although Sunrise denies its decision is linked to any recent convictions, reports the Reuters news agency."

        June 25, 2013
      2. jwcj

        Thanks for all the information as I was not completely up on all the statistics surrounding this travesty. These are not the only laws that big banks, and large corporations have been getting away with forever I recently found out that Insurance companies cannot be examined by any government agency unless the insurance company calls for the investigation itself. Apparently the board of insurance ethics are the ones who do all investigations, and as of today have never called for any kind of inquiry of any kind including tax investigations.
        To top it all off I have a friend who’s sister is married to an FBI agent and he was telling us about how even though it is against the law to smoke in any public building in D.C. just like anywhere else, it is not applied to the legislators on the hill and they even have a smoking room in the basement of the house where senators and their friends smoke cigars through all hours of the night. He went on to tell us about impromto parties where they smoke even the Cuban cigars that are illegal for anyone else to have are passed around regularly.
        It reeks of the old adage where if you have enough money you can get away with murder.
        Thanks for the link and I will go there to see what it says as I am sick and tired of the wealthy getting away with murder while the working men/women are still not back to full pay rates after we took the pay cuts of 2005.
        I will do my best to keep up with a decent conversation regarding all these subjects as long as I can retain what I read, but I have to tell you that I take 150milligrams of morphine everyday so I can deal with my pain, and I have lost a lot of my ability to comprehend what I am reading.

        June 25, 2013
        1. Neighsayer

          Livelonger’s posts are not easy for anybody, don’t feel bad.

          June 25, 2013
  2. Neighsayer

    lemme guess – because they own the world? Because they punish us, rather than the other way around?

    June 24, 2013
  3. Phat

    This is the problem with the world, you can’t change it, without first changing the way people at the top make profit and good people aren’t at the top. You first need money to change the world, but in order to make the amounts needed to change the world, you need to be one of them.

    June 26, 2013
    1. wirelessguru1

      No. You have to make sure that the system fails first and then you can change certain things…

      June 26, 2013
  4. stevehayes13

    The word “can’t” only properly applies to the physically impossible.

    June 26, 2013
    1. livelonger

      You’re right. But I don’t see much point in using sledgehammers on bank buildings.

      June 26, 2013
  5. wirelessguru1

    The ruling elites and their bankers are above the law.

    June 26, 2013
  6. juliacarlson

    This has been a really interesting article. I have always been curious about banks. I have learned a lot, thank you! https://www.tlccu.org/accounts-checking.htm

    August 28, 2014
  7. hateres

    Why banks cannot be punished is big issue and topic of the political science. The banks for the role they play are custom term papers in the affairs of the state and country. The punishment is discussed and enlightened.

    September 25, 2016