HSBC's Money Laundering Scandal (2022) | Hacker News Reader

HSBC's Money Laundering Scandal (2022)

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165 pointsvinnyglennon114 comments

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.

I'm not sure if it's a conspiracy to control the public, or simply regulators being irresponsibly incompetent that it can be considered criminal.

Most of the KYCs in the developing world can be ignored by handing $50-200 over to the right couple of people. Most of KYCs in the developed world will be handled by specialized "consultants" who will handle the paper work and deliver the needed banking services. It's the same thing but it costs more in the developed world, huh.

I'm glad you brought this up as I am at loss how most of the people accept this sad state of affairs.

> It's an increasingly major process to open one

No disagreements with your post otherwise, but I haven’t found this to be the case personally. I’ve opened two bank accounts in the past year without much hassle - one a joint account at a big bank with my partner that we were able to do fairly painlessly from our house. (Opening account in her name was online, but then we had to call in for someone to manually add me to it while we were both present for security purposes.) The other at a credit union just last week - I showed them my driver’s license, answered a few questions about what products I was interested in, bought a share, and walked out with a bank card.

Try to move to another country. Take e. g. the UK. To open a bank account you need a proof of you address in the UK like an utility bill (or anther's bank statement). To rent a flat you need a bank account because most agencies/landlords don't accept cash and would ask you to wire a holding deposit/rent/fees. Catch22. And the government in most cases knows you address anyway.

Which credit union?

All the ones I've encountered incorrectly state that they require Social Security Numbers by law. The law only requires that they have a numerical identifier, so a state ID/license should work as it apparently did in your case.

Edit: I guess the downvotes are for assuming everyone's in the U.S., sorry!

Servus, it’s a credit union in Alberta/Canada.

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.

> 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.

My girlfriend and I opened a shared bank account in December. It was five minutes in the capital one app and we had a debit card less than a week later. I’ve personally opened 4 bank accounts (including that one) through 3 different banks over the last two years and each time was a similar process.

What world do you live in where opening a bank account is somehow getting more difficult instead of extremely less?

I have a Schwab account I made online and had to deal with basically 0 humans to create. The worst I have to deal with is sometimes if I spend a lot at once I have to answer some automated questions to confirm my information hasn't been stolen. How do you reconcile this with the claim it's getting "harder and harder" when the bar to open and access a bank account is so low?

For the ~95% I think banking must be smooth or there would be great outcry.

In my experience the risk of becoming unbanked, even temporarily, has become worse and worse for the increasing number of “outliers”:

- a common name

- previous victims of identity theft or doxxing

- legal domestic cryptocurrency exchange use

- privacy-minded people (VPN use, even accidental)

- nomadic lifestyles (lots of IPs, a VOIP number)

- a cash-first lifestyle

- any negative credit or public records irrespective of time passed

- bad press about you out there (yes, some products screen for this)

- you have the wrong passport

> 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.

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.

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.

Not sure what source you do expect to hear. wouldn't delve into it any further, but it is so, from firsthand source.

When you move this kind of money, you don't just go to branch and ask "to speak to someone". Usually you know someone from bank who can arrange that's needed.

And they know. And you know they know. And they know you know they know. So usually it's very clear.

There is no ethical concerns at this money volume at any bank, that's I can say for sure. It's only matter of risk/reward, with potential risks coming from regulators. For talented bankers who know how to structure businesses in middle, it's a no-brainer.

Doesn't just apply for drug cartels but for any sort of money.

And yea, 900m is something they have been caught with. Pretty sure actual number is substantially different.

>>When you move this kind of money, you don't just go to branch and ask "to speak to someone". Usually you know someone from bank who can arrange that's needed.

That's probably true as well. Someone hears someone say in bar that their controls are lax, or someone in a bank is coerced into helping a cartel etc.

And don't get me wrong - this is still Very Bad that this happened, but it happened due to control and process cock-ups, not as a conscious desire to pursue a new business opportunity.

No, it's far too risky and stochastic to rely on overheard bar convos for this kind of thing. To do this kind of large-scale fraud you need to be built into the system, you need reliable methods, backstops, entire plans for fall guys and controlled demolition of your schemes.

Ask yourself what certainties you, yourself, would want if you decided to use your job to conduct significant fraud. Then imagine you could get all of them because you're an insider to the system, you can write the laws, pay off the right officials, blackmail the lowly functionaries, etc.

It's not a new business opportunity—HSBC was founded to finance the Opium Wars in China! They know how to do this. The real question is why let us see, why let something like this become public news. As always, the answer can be found by starting with the question, Who benefits? and then following the money from there.

I'm not actually expecting a source—it was a polite way of saying that person has no idea what they're talking about.

Your description is in line with what I've read—there's hardly a smoking gun, scruples are almost totally absent, this is very serious business.

The risk is spread throughout the entire milieu of bankers, central bankers, cartel heads, cartel lawyers, etc. A similar model to the revolving door in DC. Capitalism itself tends toward cartelization, which is what allows the power elite to move freely about in a mutually assured destruction kind of way. If everyone is guilty, no one is guilty and we're in a pact to maintain that.

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.

I'm surprised that you'd bring up BCCI in this instance, an institution absolutely steeped in intelligence spookery. Refer to The Outlaw Bank by Jonathan Beaty.

HSBC was founded to finance the Opium wars in China in the 19th century. Let's be adults here, the world's biggest banks aren't letting drug trade profits, the world's most lucrative trade, simply fall to small fries. They own it.

Global size of illicit drug economy: $360 billion

Global size of FX market: $7.5 trillion per day

It's not small money, but it's not that big compared to financial markets.

Idk where you got that figure for the drug economy but $360B per year is on the low-end and likely outdated.

Going off a UN report from the 90s, the illicit drug trade is similar to international trade in oil and gas—that's the order we're talking about. Remember this is a commodity, so it's a bit misleading to compare it the flow of money in foreign exchange markets.

UNDCP Technical Series Number 6:ECONOMIC AND SOCIAL CONSEQUENCES OF DRUG ABUSE AND ILLICIT TRAFFICKING.

So in your mental model of how this works, Pablo Escobar (or whoever) rings up the CEO of multinational banks and says "I've got a business proposition for you."?

No, this is not new. This is one of the oldest games there is, so it's more like grooming young lawyers/bankers to step into a role, a type, that's existed for hundreds of years. You have a pipeline of strivers to choose from, you have ultimate leverage over them. You force their hand.

That is an exceptionally contrarian claim.

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.

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.

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.

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.

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.

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

> 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.

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.

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.

> 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.

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.

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.

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.

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.

But how do they give it to you? If it's cash that’s going to raise all sorts of red flags.

Thats why the KYC and cash deposits are such a focus. The financial world is basically split into “money in the system” (where tracking source and destination are easy) and “money outside the system” (cash which is anonymous).

The government has just made it really hard to get money “into the system”. Its basically the chokepoint where you catch money from illegal sources.

Hard, but not impossible. Probably they just raised the commission that a money launderer charges you, which is progress I guess.

> the IRS can’t go challenge the people and ask where they got the money to give to you

Isn't that what the IRS very much does?

You're moving the risk to your "friends".

Or more likely, to a bunch of mules you found on the internet who want to believe that they have a job sending money back and forth.

All of us are script kiddies in this game. My bet is, the real cartels have moved way beyond anything that any of us knows about. Art, jewels, shell companies, real estate... the list of possibilities goes on.

That said; banks have to report any transaction that's large ($10,000 is it?), no matter to whom. I'd add "even if it's a gift" although I only suspect that's true.

There is always the old trick of just depositing the cash into safe deposit boxes - all the protection of a bank with none of the reporting. Works best if the bank is more then thirty miles from your home and business.

> safe deposit boxes - all the protection of a bank

Nope: https://news.ycombinator.com/item?id=34266095

IIRC you can only gift in the range of 5 figures/year/person.

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

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.

I hate banks as much as anyone but... The concept of "money laundering" is a fabricated offense that shouldn't even exist. It basically shifts the duties of law enforcement onto private businesses and individuals. The expectation for bankers or real estate agents to uncover criminals when the police struggle to do so is unreasonable and doesn't make sense. Sure they should cooperate with police investigations but they shouldn't be leading them. Additionally, private businesses are not subject to the same legal principles such as the presumption of innocence and due process, leading to countless individuals being denied access to basic banking services based on perceived risk[0]. To top it off, those laws are ineffective and very costly to implement[1].

[0] There is an estimated 1,400,000,000 unbanked people worldwide (a good chunk of which are denied access on the basis of risk and/or lack of satisfying identification).

[1] https://www.cato.org/blog/money-laundering-laws-ineffective-...

I don't think you answered the question. If I facilitate a drug cartel moving kilograms of cocaine, I'll be in jail until I'm very old. If a bank knowingly facilitates the same outcome through different means, why doesn't anyone at the bank face the same charges?

What you're saying is that even though money laundering is necessary for drug cartel operations, it shouldn't be a crime (or should be a much lesser crime). So if I carry the drugs across state lines, even if I put in the same abstract amount of effort to completing a drug trade as the folks at the bank laundering money, my crime is worse?

There is the obvious argument that neither of these should be real crimes. But the fact remains that today in the world that exists, one group of people that facilitate drug cartel operations are punished much more harshly than another group. The disparity in punishment is what the parent comment is remarking on.

You bring up a fascinating aspect of money which I like to contemplate about often.

Money is the pure abstraction in the sense that it hides just about everything that brought it into existence. If I look at two $100 bills they are exactly the same; theoretically and practically. And yet they couldn't possibly be similar, they could have originated in crimes, be parts of legitimate businesses, so on and so forth. But they still continue to exist as pure abstraction. One could get into all sorts of philosophical rabbit holes.

What sorts of arguments would have had at the cusp of using coins?

I think you'd find David Graeber's book Debt very interesting. There are a bunch of common assumptions about how money came into existence that simply aren't what happened based on the archeological record.

Coinage came a lot later than basic debt ledgers, and it was largely an organizational hack by rulers to feed and house their armies. They'd mint coins with their face as seal or whatever, and would issue these to the soldiers as payment, while also requiring all citizens to pay a tax in those same coins. Suddenly everyone is figuring out how to give the soldiers what they want without you having to organize any of it directly.

You didn't mention it explicitly so just in case you didn't know, what you are describing is called fungibility[0] and is indeed an important property of money.

[0] https://en.wikipedia.org/wiki/Fungibility

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.

Then by that logic, the drug runner should not be jailed either, as they too are a victim rather than an accomplice. May be they too are being threatened by the cartel to cooperate, and so on.

Taken far enough, you really can't penalize anyone and things like sanctions don't work and have no teeth.

I think awareness, agency, and intent are also factors here.

In your and the OPs examples:

- CEO should have a large amount of agency and awareness of the situation, meaning they should be on the hook for severe negligence at the least. If intent can be proven, that should definitely result in criminal charges.

- A bank teller might have awareness if they personally handle suspiciously large transactions per month, but the amount of agency they have in the situation is low. They can either report it up their chain of command, do nothing, or work elsewhere. You might be able to demonstrate intent here if it’s the same teller and they don’t raise any alarms, but that’s also assuming nobody has valid reasons for regular 50k deposits and that the teller doesn’t fear for their job or wellbeing.

- Drug runner is a tricky one—how much agency do they have? Are they under duress? They likely intend to run drugs unless they’re in the know about their cargo. As other commenters posted, there’s also no official way to dilute responsibility here as the organization running drugs isn’t beholden to our legal system, so our theoretical drug runner is the only person available to punish.

It’s an interesting thought experiment. I’d like to hear thoughts on how folks think stuff like this should be prosecuted — what outcomes do we want to promote and what actions would promote those outcomes?

"Money laundering" and "drug smuggling" are two completely different things that can't be reasonably compared. A better analogy here would be shipping companies or taxi drivers being caught unknowingly transporting drugs. I'm pretty sure the USPS does that every day and I don't think any of their execs go to prison over that. Same for bus, taxi or airline companies. In the online world, the DMCA explicitly ensures that web hosts and platform operators are not on the hook for unknowingly hosting illegal content.

> Taken far enough, you really can't penalize anyone and things like sanctions don't work and have no teeth.

You're getting somewhere, actually. Crimes generally don't happen in a vacuum. In most crimes, the society around the perpetrator is complicit. Most people aren't born compelled to become delinquents. They're often driven by unfortunate circumstances and ignorance, situations that society shares part of the blame too. The criminal law just chooses the most unfortunate person as the "protagonist" to punish.

There are certainly "evil" people, but they're far less than the criminal law seeks to convict.

Do you make the CEO responsible even though she probably had no idea that this was going on?

You send the CEO to prison because they're responsible for what happens under them. CEOs always say they get paid so much because they're the ones bearing ultimate responsibility, so off to jail you go.

The first person who went to prison for the VW emissions scandal was the engineer.

As it should be. The hands that physically commit the crime (or the code) are usually the dirtiest.

Ah, yes, giving management that sweet plausible deniability.

Just create an impossible demand on your workers and then act surprised when they employ unethical practices to meet those demands. Just like Wells Fargo.

https://en.m.wikipedia.org/wiki/Wells_Fargo_cross-selling_sc...

That isn’t what I said. I said that the person who commits the crime should be the first one to go to jail. That implies others should follow.

Often times, the crime that's committed is because the boss told them to do it, then threatened the engineer when they initially said No.

Yes well that’s how a lot of crime happens. We don’t avoid prosecuting a triggerman, carjacker, or bank robber just because they got the order and were threatened for not complying. Even the Eichmanns that were just following orders went to Nuremberg.

> We don’t avoid prosecuting a triggerman, carjacker, or bank robber

Well we do give them massively commuted sentences for cooperating

But we still require them to cooperate and take responsibility instead of what most software engineers try to do which is blame management (like the prior poster I was replying to).

That's completely unreasonable. The probability of any Fortune 500 CEO going to prison would basically be 100%. Should the US president go to prison whenever a government employee commits a crime as well?

The President isn't the CEO of America, Inc., and American government isn't a monolithic organization.

However, yes, if sufficiently illegal activities were going on within the President's cabinet, then yes, send the President to prison.

As for any Fortune 500 CEO going to prison, well, that risk would certainly incentivize the pursuit of good behavior from the top down, wouldn't it?

At some point it just makes the entire system untenable. Do you think, in such a world, you would ever hire anyone that you didn’t trust with your life?

In fact, you probably wouldn’t even hire anyone that wasn’t related to you.

The fish rots from the head down.

Next time your bank account gets closed or an important payment gets held because the bank thinks there is something potentially dodgy, you will reflect on your comments about bankers going to jail if some drug dealer ever manages to get a payment through the banking system. Laundered money doesn't come with a "drug money" sticker, usually it comes from a business that is designed to look legit.

> 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-pris...

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.

Banking has achieved de facto regulatory capture. We see the same patterns over and over again of the consequences of high risk systemic behavior being born by taxpayers, but it's business as usual for everything continuing the status quo. Unless voters start creating pain at the ballot box, it'll just continue.

There's also unfortunately some practical issues with prosecuting finance crimes. The cases are long and difficult to articulate to a jury. The SEC, IRS, etc have limited resources by design of congress, and so prioritize slam dunk cases and plea deals. The exception seems to be if enough big investors get scammed.

In this particular case it’s because the UK Chancellor of the exchequer called the head of US treasury and intervened on their behalf (as did the regulatory body in the UK).

If a drug mule has powerful friends they’d probably get a lighter sentence too.

Aren’t most of the offenders located outside of the USA? The USA claims international jurisdiction on money laundering and bribery and such, but other countries don’t necessarily agree. The best they can do is fine a company a lot of money (which they pay up because otherwise they can’t do business in the USA), actual criminal prosecution against individuals would require a lot of cooperation in countries like China or Singapore who are unlikely going to provide that. Even London (where the top execs are based) is going to be a stretch.

"Why not a single banker was jailed over HSBC’s billion-dollar money laundering scandal" - https://inews.co.uk/news/long-reads/hsbc-money-laundering-sc...

don't forget art markets too!

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.

This DPA has already expired ( 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.

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.

Who said poor investment? $1.9 billion is just small cut on return to pay, no?

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).

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.

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-id...

2) https://www.abc.net.au/news/2018-06-04/commonwealth-bank-pay...

3) https://www.bellgully.com/insights/westpac-agrees-to-au-1-3-...

4) https://www.theguardian.com/australia-news/2019/nov/21/legal...

Some “fun” reading from austrac and friends 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.

The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF Act) covers AML in Australia. Tranche (Part) 1 was implemented immediately. Tranche 2, covering real estate agents (among others) was supposed to follow reasonably soon after. It's now been ~17 years and it's still not implemented. [1]

In those years, the Australian property market boomed and states like New South Wales with its Stamp Duty tax generated billions ($9.379 billion for the 2020-21 financial year) in revenue [2]

Last week's arrests [3] are a drop in the bucket.

[1] https://insight.thomsonreuters.com.au/business/posts/tranche...

[2] https://www.abc.net.au/news/2021-06-20/stamp-duty-adds-9-379...

[3] https://www.abc.net.au/news/2023-02-03/afp-money-laundering-...

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.

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.

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.

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.

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.

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).

There's a Netflix documentary about this

https://www.imdb.com/title/tt7909188/

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-u...

2: https://www.theguardian.com/business/2021/jul/28/hsbc-faces-...

3: https://en.wikipedia.org/wiki/Lisa_Osofsky

4: https://twitter.com/nw_nicholas/status/1420692450260172803

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

Edit: Here's the video on YouTube: https://youtu.be/Bkshh4jOzME

Tory peer, but yes!

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

"Reference guide to anti-money laundering and combating the financing of terrorism" (2003):

https://documents.worldbank.org/en/publication/documents-rep...

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

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.

> Another one?

It's about the 2012 case.

> 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.

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-...

> 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.

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.

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.

Another reason to pick HSBC as my next bank.

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...

They’ve been in the thick of it since forever, unrelentingly.

https://www.cadtm.org/HSBC-the-bank-with-a-shameful-past

https://unpublishedarticles.com/hsbc-hong-kong-shanghai-bank...

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

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)

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.

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