As I noted last year, when DOJ trumpeted their settlement with HSBC for a slew of money laundering violations, they didn’t mention that HSBC had provided almost a billion dollars to a Saudi bank that funded terrorists. Effectively, HSBC’s material support for terrorism for 5 years after it first realized it was doing so got completely ignored.
It turns out, between the time in 2010 when HSBC stopped providing cash dollars to a terror-supporting bank and the time of the DOJ settlement, HSBC was still violating counterterrorism sanctions. Treasury’s Office of Foreign Assets Controls just issued another settlement with HSBC’s US branch, detailing how HSBC processed 3 transfers totaling over $40,164 involving Husayn Tajideen after the bank learned he had gotten listed a designated terrorist. Not a huge amount of money, but over 4 times what Basaaly Moalin is going to jail for.
It’s OFAC’s rationale it uses to rationalize giving a recidivist just a $32,400 penalty that I find particularly egregious.
The settlement amount reflects OFAC’s consideration of the following facts and circumstances, pursuant to the General Factors under OFAC’s Economic Sanctions Enforcement Guidelines, 31 C.F.R. part 501, app. A. OFAC considered the following to be mitigating factors: HBUS voluntarily self-disclosed the apparent violations to OFAC; HBUS took appropriate remedial action in response to these apparent violations and now has a more robust compliance program in place; and HBUS has not received a penalty notice or Finding of Violation from OFAC for substantially similar apparent violations in the five years preceding the earliest date of the transactions giving rise to the apparent violations. The settlement amount reflects the following aggravating factors: HBUS managers and employees whose primary responsibility includes OFAC compliance were aware of the first apparent violation and had reason to be aware of the second and third apparent violations; the apparent violations resulted in actual economic benefit to an SDGT; HBUS is a large and commercially sophisticated financial institution; HBUS initially provided an incomplete response to an administrative subpoena; and, at the time of the first apparent violation, HBUS’ compliance program did not screen all MT 199 messages for potential OFAC matches. OFAC further reduced the proposed penalty in light of HBUS’ agreement to settle its potential liability for the apparent violations. [my emphasis]
Some of this is typical mumbo jumbo (though in this case, should be read with the awareness that Stuart Levey, who used to be Under Secretary of Terrorism Finance and Intelligence, got named HSBC’s General Counsel in 2012, so the subsequent actions likely represent his involvement).
But the claim that HBUS hadn’t had any substantially similar violations in the five years previous is just ridiculous. They had been busted for all sorts of very similar money laundering problems involving known drug kingpins and were uniquely important in providing cash that terrorists likely used for significant attacks. It’s only not substantially similar because it is orders of magnitude worse, so much so DOJ got involved and the settlement was with a different agency!
And in response to a recidivist being caught again, OFAC fines a bank with $14 billion in profits $32,400.
Update: In a statement to WSJ, Treasury said this settlement with a recidivist is unrelated to the past settlement with the recidivist.
But a Treasury spokesman said in an email that Tuesday’s settlement is unrelated to the December 2012 agreement with OFAC and other federal and state agencies.
“This action is similar to other settlements OFAC has reached with regard to apparent violations committed by U.S. financial institutions,” he said.
Yesterday, the Italian magazine Panorama claimed that the NSA had wiretapped the Vatican.
I have some questions about the veracity of the report. NSA has denied it more vigorously than other allegations of tapping world leaders. Panorama is not known to have access to the Edward Snowden documents. One key claim — that the current Pope, Jorge Mario Bergoglio, has been surveilled since 2005 — was actually sourced to WikiLeaks in the story (In addition to cables on Argentine politics, Bergoglio shows up in a 2003 cable speculating on the possibility of a Latin American Pope).
All that said, I am intrigued by this claim.
Panorama said the recorded Vatican phone calls were catalogued by the NSA in four categories – leadership intentions, threats to the financial system, foreign policy objectives and human rights.
I did a quick review of WikiLeaks cables on the Vatican (remember, these are classified at no more than the Secret level, and therefore are not going to have any intercept information in them, and they of course stop at 2010). The human rights issues pertain to interfaith dialogue and the rights of Catholics in repressive countries, the Church’s role in anti-gay laws, and allegations of anti-Semitism (this cable, on the Church prioritizing unity and thereby endorsing Holocaust denial, is one of the few Secret ones). There are fewer that relate directly to the Church’s role in the financial system; though a good many cables with “financial” content relate to Syria or, especially, Lebanon, and include the Vatican because of its influence with Christian power brokers in the region (this cable, on Syrian money laundering, was forwarded to the Vatican mission for some reason).
But there two other reasons why the Vatican might be an NSA target based on those topics: its multi-decade cover-up of pedophilia (and the impact legal investigations and settlements might have around the world), and the Vatican’s role in money laundering. The recent disclosures of Vatican money laundering suggest Iraq, Iran, and Indonesia have used the bank, as well as the Italian mafia, but given its ties to Lebanon, I wouldn’t be surprised if it were also laundering money from that country, which is another close focus of the US’ own money laundering attention.
In other words, in addition to wiretapping the Vatican because it wields special influence in countries around the world (the leadership intentions and foreign policy objectives category), the US would have reason to surveil it because of what amount to Vatican actions that make it a Transnational Criminal Organization, completely apart from matters of faith.
That is, if NSA applied its apparent mandate to track TCOs indiscriminately.
But I bet you they don’t. While I am sure they track Latin American, African, and South Asian drug networks, I’m certain they track Russian mobsters who have ties to online crime, and I’m sure they are tracking and probably have an active role in the investigation of Yakuza’s ties to big Japanese banks (most of these are either named Treasury drug kingpin or TCO targets), I also believe if the NSA tracked transnational crime organizations generally, its efforts would be shut down tomorrow.
Imagine, for example, if in addition to using Title III wiretaps (though barely) and self-disclosure and evidence generated by other financial institutions in put-back suits, the NSA used its bulk collection to track JPMC’s international transfers to see whether any of it constituted “foreign intelligence,” and from that referred any evidence of a crime to the FBI? Imagine if the NSA were stealing all of JPMC’s transfer information, even outside its access to SWIFT, to see how JPMC laundered its world-destabilizing actions through multiple jurisdictions? And both JPMC and HSBC have a known history of material support for terrorism, which certainly ought to justify such spying (noting, of course, that I think JPMC did get spied on in conjunction with the Scary Iran Plot, which may have forced FinCEN to settle with it on other outstanding sanction violation issues).
They wouldn’t even need to track JPMC and other multinational banks in the name of transnational crime and terrorism; the Sovereign Wealth Funds of the world – both of volatile Middle Eastern countries, Asian targets, but even in Europe — have effectively become foreign policy entities. Do they track what Qatar and the Emirates do with their SWFs?
As I said, I doubt it. While I suspect as this scandal develops we’ll find more and more evidence that the NSA has spied on targets selected for their financial competition with the US and UK (we’ve already seen hints they collected intelligence on the Euro versus the dollar, Brazil’s competitive position vis as vis the US, for example), I also suspect if there were ever a hint that the NSA treated JPMC or HSBC like it did other TCO targets, it would get shut down in a matter of weeks.
I’m in the middle of a deep dive in the Section 215 White Paper — expect plenty of analysis on it in coming attractions!
But I want to make a discrete point about this passage, which describes what happen to query results.
Results of authorized queries are stored and are available only to those analysts trained in the restrictions on the handling and dissemination of the metadata. Query results can be further analyzed only for valid foreign intelligence purposes. Based on this analysis of the data, the NSA then provides leads to the FBI or others in the Intelligence Community. For U.S. persons, these leads are limited to counterterrorism investigations.
The Primary Order released several weeks back calls these stored query results “the corporate store.” As ACLU laid out, the government can do pretty much whatever it wants with this corporate store — and their analysis of it is not audited.
All of this information, the primary order says, is dumped into something called the “corporate store.” Incredibly, the FISC imposes norestrictions on what analysts may subsequently do with the information. The FISC’s primary order contains a crucially revealing footnote stating that “the Court understands that NSA may apply the full range of SIGINT analytic tradecraft to the result of intelligence analysis queries of the collected [telephone] metadata.” In short, once a calling record is added to the corporate store, anything goes.
More troubling, if the government is combining the results of all its queries in this “corporate store,” as seems likely, then it has a massive pool of telephone data that it can analyze in any way it chooses, unmoored from the specific investigations that gave rise to the initial queries. To put it in individual terms: If, for some reason, your phone number happens to be within three hops of an NSA target, all of your calling records may be in the corporate store, and thus available for any NSA analyst to search at will.
But it’s even worse than that. The primary order prominently states that whenever the government accesses the wholesale telephone-metadata database, “an auditable record of the activity shall be generated.” It might feel fairly comforting to know that, if the government abuses its access to all Americans’ call data, it might eventually be called to account—until you read footnote 6 of the primary order, which exempts entirely the government’s use of the “corporate store” from the audit-trail requirement.
The passage from the White Paper seems to suggest there are limits (though it doesn’t explain where they come from, because they clearly don’t come from FISC).
This analysis must have a valid foreign intelligence purpose — which can include political information, economic information, espionage information, military information, drug information, and the like. Anything other countries do, basically.
But if the data in the corporate store pertains to US persons, the FBI can only get a lead “for counterterrorism purposes.”
At one level, this is (small) comfort, because it provides a level of protection on the dragnet use.
But it also may explain why HSBC’s US subsidiary didn’t get caught laundering al Qaeda’s money, or why JP Morgan always gets to self-disclose its support for Iranian “terrorism.” So long as the government chooses not to treat banks laundering money for terrorists as material support for terror, then they can consider these links (which surely they’ve come across in their “corporate store!) evidence of a financial crime, not a terrorist one, and just bury it.
I would be curious, though, whether the government has ever used the “corporate store” to police Iran sanctions. Does that count as a counterterrorism purpose? And if so, is that why Treasury “finds” evidence of international bank violations so much more often than it does American bank violations?
Colleen Rowley has a great list of questions Jim Comey should be asked today in his confirmation hearing (I’ll be live-tweeting it, so follow the twitter feed over there. >>>>>>
Here are five questions I would add:
Glenn Greenwald has a tremendous scoop, for the first time I know of publishing a Section 215 warrant — in this case one asking for all US-based traffic metadata from Verizon Business Services from April until July.
Now, I think that this actually affects just a subset of all Verizon traffic: the business-focused traffic rather than Verizon Wireless or similar consumer products most people subscribe to (and if that’s so, the shitstorm that is about to break out will be all the more interesting given that rich businessmen will be concerned about their privacy for once).
Also, this does not ask for call content. It asks only for metadata, independent of any identifying data.
In other words, they’re using this not to wiretap the conversations of Occupy Wall Street activists but to do pattern analysis on the telecom traffic of (I think) larger businesses.
The request does, however, ask for location data (and Verizon does offer bundles that would include both cell and cloud computing). So maybe the FBI is analyzing where all Verizon’s business customers are meeting for lunch.
My extremely wildarsed guess is that this is part of hacking investigation, possibly even the alleged Iranian hacking of power companies in the US (those stories were first reported in early May).
I say that because cybersecurity is a big part of what Verizon Enterprise (as I believe they now go by) sells to its business customers; the infographic above, warning of data breaches when you least expect it (heh), is part of one they use to fear-monger its customers. Energy consumers are one of its target customer bases. And the case studies it describes involve several Smart Grid projects. Precisely the kind of thing the government is most freaked out about right now.
After all, aside from Medicare fraud, the government simply doesn’t investigate businesses, ever. Certainly not the kind of bankster businesses we’d like them to investigate. One of the few things they investigate business activities for is to see if they’ve been compromised. Moreover, the Section 215 order requires either a counterintelligence or a counterterrorist nexus, and the government has gone to great lengths to protect large businesses, like HSBC or Chiquita, that have materially supported terrorists.
Anyway, that’s all a wildarsed guess, as I said.
Ah well. If the government can use Section 215 orders to investigate all the Muslims in Aurora, CO who were buying haircare products in 2009, I’m sure big business won’t mind if the government collects evidence of their crimes in search of Iran or someone similar.
Update: Note, this order seems to show a really interesting organizational detail. This is clearly an FBI order (I’m not sure who, besides the FBI, uses Section 215 anyway). But the FISA Court orders Verizon to turn the data over to the NSC. This seems to suggest that FBI has NSA store and, presumably, do the data analysis, for at least their big telecom collections in investigations. That also means the FBI, which can operate domestically, is getting this for DOD, which has limits on domestic law enforcement.
Globalization is dangerous.
But not, as it turns out, because it has gutted the middle class. Not even because a globalized supply chain has made it easier for our rivals to sabotage our defense programs, or that a globalized supply chain has led to a loss of manufacturing capacity that threatens our defense, to say nothing of our distinctly American commercial sectors.
Rather, retired Admiral James Stavridis, in a more popularized version of a piece he wrote for a National Defense University volume on the topic, argues that “deviant globalization,” whether that of drug traffickers, terrorists, counterfeiters, or hackers, poses a rising threat.
Convergence may be thought of as the dark side of globalization. It is the merger of a wide variety of mobile human activities, each of which is individually dangerous and whose sum represents a far greater threat.
I’m sure it is a threat. But Stavridis makes the same mistake just about everyone else makes when they consider criminal globalized networks to be a security threat: they ignore that there is little these illicit networks do that licit ones didn’t already pioneer. They ignore that the only thing that makes them illicit is state power, the same state power that corporatized globalization has weakened.
In fact Stavridis’ fourth point telling how to combat deviant globalization is notable for what it’s missing.
Fourth, we must shape and win the narrative. Many have said there is a “war of ideas.” That is not quite the right description. Rather, the United States is a “marketplace of ideas.” Our ideas are sound: democracy, liberty, freedom of speech and religion — all the values of the Enlightenment. They have a critical role in confronting the ideological underpinnings of crime and terror. Our strategic communications efforts are an important part of keeping our networks aligned and cohesive.
You see it? In spite of using the metaphor of the market to describe the realm of ideas, Stavridis neglects to mention that one of our ideas, so-called capitalism (or the marketplace itself!), that value of Enlightenment, is precisely the logic that has made globalization imperative.
If the way to beat these criminal globalized networks is to compete ideologically, but the ideological foundation our elites cling to most desperately is the same one the criminal globalized networks are exploiting so spectacularly, haven’t we already lost the battle of ideas?
Stavridis’ choice to ignore capitalism is probably why he doesn’t get the problem with his call to “follow the money.”
Third, we must follow the money. Huge sums of cash from these trafficking activities finance terrorists and insurgents such as the Taliban, as well as corruption. The money is used to undermine fragile democracies. Efforts to upend threat financing must be fused with international initiatives, move across U.S. agency lines and have the cooperation of the private-sector institutions involved.
It is true that globalized cash flows undermine weak governments (the same ones that otherwise might make these criminal globalized networks illicit). But that’s at least as true of the money looted from poorer countries and deposited, completely legally per western elites, in secrecy regimes, or of the hot money that destabilizes the global economy more generally. Moreover, one of the biggest impediments to tracking the flows of criminal globalized networks is that the so-called licit multinational banks they use to transfer their money are more interested in the profits from the money than in cooperating with increasingly weak states. So long as HSBC can get away with a wrist slap, after all, why would any multinational bank give up its customer base to American authorities?
Stavridis ends his column by citing Hardy’s warning about icebergs.
Just over a century ago , the poet Thomas Hardy wrote “The Convergence of the Twain” about the collision of the Titanic and the iceberg that sank it. “And as the smart ship grew/ In stature, grace, and hue/ In shadowy silent distance grew the Iceberg too.” There is an iceberg out there in the form of weapons of mass destruction; what is most worrisome is the convergence of such a weapon with a sophisticated global trafficking route enabled by cybercrime and the cash it generates. That is the convergence we must do all in our power to prevent.
Stavridis almost gets it. He almost gets it that these global trafficking routes, whether deemed licit or illicit by increasingly weak states, are the iceberg that is looming.
It’s just that he chooses to ignore the iceberg he can see for the parts he can’t see.
A lot of people on Twitter are talking about how dumb-as-shit Dzhokhar Tsarnaev’s college buddies, Azamat Tazhayakov, Dias Kadyrbayev, and Robel Phillipos were when they allegedly removed evidence relating to the Boston Marathon bombing and threw it in the trash or (in the case of Phillipos) lied about those activities.
I’m not convinced, though.
I’m not defending what the young men did. Nor am I vouching for their intelligence. Nor am I saying they shouldn’t be prosecuted — they should!
But I’m having a hard time distinguishing what they did from what, say, HSBC did, for years. Aside from the fact that HSBC affirmatively helped terrorists, rather than just covered up that help. And aside from the fact HSBC made a billion dollars doing so.
As a reminder, where’s what HSBC did — eliciting nary a blink of an eye from the same DOJ that is now (rightly) prosecuting these dumb-as-shit kids. They were a key — perhaps the key — bank providing Saudi al-Rajhi bank cash dollars. Details emerged in 2001 that the bank had been providing the dollars terrorists used in their plots, including the 9/11 plot. It took four years for HSBC to begin to get worried about it. But it still only halted the dollar trade for al-Rajhi while its US regulator, OCC, looked into its money laundering practices (it says something about HSBC’s awareness of the sensitivity of this issue that they didn’t halt their other abundant money laundering activities).
And then, once OCC was out of its hair, HSBC moved back into the cash dollar business with al-Rajhi, a bank reportedly involved with the most spectacular terrorist acts of recent years.
Just HSBC’s brief exit from the cash business with al Rajhi is similar to what Dzhokhar’s dumb-as-shit buddies did when they put his backpack in the public trash. Covering up terrorism.
Remember how HSBC facilitated massive money laundering, around the globe, for over a decade, but got away with a hand slap? Remember how a single check cashing store in LA got very different treatment?
Well, add sovereign citizens to the list of Americans who don’t get the treatment HSBC got.
A man known to reject government authority as a member of the “sovereign movement” was slammed with a federal sentence Wednesday of 98 months in prison and ordered to forfeit more than $1.29 million in assets.
Shawn Rice, 50, was convicted last July on one count of conspiracy to commit money laundering, 13 counts of money laundering, and four counts of failure to appear, the U.S. attorney for the district of Nevada said in a release.
Once again, after winning a harsh sentence, DOJ’s representative talked tough about the importance of prosecution.
“Persons who commit financial crimes victimize organizations, government and the public,” said U.S. attorney Daniel Bogden. “Our office and our federal partners will work jointly with local and state law enforcement to ensure that these persons are caught and prosecuted.”
If I weren’t officially on vacation, I’d check the docket on this, though for the moment I’ll accept that Rice warranted such tough treatment.
But these tough words would sure be more credible if DOJ consistently treated money launderers with this seriousness.
Citing this line from Lanny Breuer in last week’s Frontline program,
I think I and prosecutors around the country, being responsible, should speak to regulators, should speak to experts, because if I bring a case against institution, and as a result of bringing that case, there’s some huge economic effect — if it creates a ripple effect so that suddenly, counterparties and other financial institutions or other companies that had nothing to do with this are affected badly — it’s a factor we need to know and understand.
Sherrod Brown and Chuck Grassley have sent a list of questions they want Eric Holder to answer by February 8.
The questions are:
I’m interested in their focus on contractors. Has someone like Promontory Financial Group been making these decisions too?
In any case I await Holder’s non-responsive answer with bated breath.
When Mike Allen asked Sheldon Adelson in September why he had dumped so much money in what would be an unsuccessful attempt to help Republicans win in november, Adelson’s first reason was that he was being unfairly treated by DOJ.
Self-defense: Adelson said a second Obama term would bring government “vilification of people that were against him.” He thinks he would be at the top of that list and contends that he already has been targeted for his political activity.
Adelson’s Las Vegas Sands Corp. is being scrutinized by federal investigators looking into possible money-laundering in Vegas, and possible violation of bribery laws by the company’s ventures in China, including four casinos in the gambling mecca of Macau. (Amazingly, 90 percent of the corporation’s revenue is now from Asia, including properties in Macau and Singapore.)
The country’s leading megadonor is irritated by the leaks. “When I see what’s happening to me and this company, about accusations that are unfounded, that kind of behavior … has to stop,” he said.
Adelson gave the interview in part to signal that he intends to fight back in increasingly visible ways. Articles about the investigations appeared last month on the front pages of The Wall Street Journal and The New York Times. He maintains that after his family became heavily involved in the election, the government began leaking information about federal inquiries that involve old events, and with which the company has been cooperating.
The aim of the leaks, he argued, is “making me toxic so that they can make the argument to the Republicans, ‘This guy is toxic. Don’t do business with him. Don’t take his money.’ Not all government employees are leakers, but most of the leakers are government employees.”
Asked to response to Adelson’s comments, the Justice Department said it does not comment on, or confirm, investigations.
While Adelson blames DOJ for leaks, much of the outlines of his corrupt business doings came from public court filings.
One thrust of the investigation pertains to whether the fixer Adelson’s casino company used in China, Yang Saixin, had engaged in bribery. Another involves evidence that a Chinese-born Mexican businessman with ties to the Sinaloa cartel, Zhenli Ye Gon, laundered drug profits through the Venetian casino in Las Vegas (using HSBC). And while Adelson himself has not been implicated in those and other money laundering and bribery allegations, the breach of contract suit brought by his former Macau CEO, Steven Jacobs, alleges that Adelson was personally involves in orders that Jacobs extort Chinese officials and sustain a “prostitution strategy.”
And while there were hints just before the election that Adelson and his company would be treated just like every other MOTU–given a wrist slap–the WSJ yesterday described the signs of the inevitable settlement. There’s the hiring of former US officials to internally police money laundering (and, probably, to turn the Sands into an espionage asset).
Sands has recently hired three former FBI agents to strengthen anti-money-laundering efforts and improve the background checks the company does on VIP customers and junket operators, the people familiar with the matter said.
And there’s the promises to stop allowing customers to hide their identity.
The casino operator also will no longer allow gamblers to transfer funds from their bank accounts under an alias, according to a person familiar with the matter.
Sands and other casino operators have allowed important clients to deposit money—on occasion millions of dollars at a time, in the case of Sands at least—in accounts in one country and use it in another for gambling, according to casinos executives and documents reviewed by The Wall Street Journal. The casinos say their systems are safe against money laundering.
But law enforcement authorities say they are concerned about the use of these types of transfers across international borders, particularly from junkets; without the more specific source-of-funds and other requirements that banks provide, those fund exchanges could carry a high risk of money laundering, they say.
As well as generalized compliance improvements.
In addition, the casino operator is retraining its staff on U.S. antibribery laws and on ways to avoid doing business with people and entities on the U.S. sanctions list, which includes alleged terrorists, narcotics traffickers, and other perceived threats with whom U.S. firms are banned from doing business, according to another one of the people.
This is, in short, precisely what we see every time the DOJ lets a big financial entity off of money laundering charges that small fry like check cashing store managers would get indicted and go to prison for.
So Adelson need not have spent those millions to try to defeat Obama. Obama’s DOJ was always unlikely to go after his company aggressively.
I could be wrong, but it appears as if Lanny Breuer is about to declare the Sands casinos systematically important and therefore too big to jail.