I noted last week how prosecutors were claiming they were being extra tough on HSBC for all its money laundering because of the seriousness of the charge they were going to defer: money laundering. Yesterday, with great fanfare, DOJ rolled out their deferred prosecution for money laundering, as if it were a good thing to ratchet up the charges you excuse.
But I was struck even more by how DOJ treated HSBC’s crimes they chose not to indict. Here’s how Assistant Attorney General Lanny Breuer described HSBC’s crimes:
HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries.
From 2006 to 2010, the Sinaloa Cartel in Mexico, the Norte del Valle Cartel in Colombia, and other drug traffickers laundered at least $881 million in illegal narcotics trafficking proceeds through HSBC Bank USA. These traffickers didn’t have to try very hard. They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico’s branches.
In total, HSBC Bank USA failed to monitor over $670 billion in wire transfers from HSBC Mexico between 2006 and 2009, and failed to monitor over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico over that same period.
In addition to this egregious lack of oversight, from the mid-1990s through at least September 2006, HSBC knowingly allowed hundreds of millions of dollars to move through the U.S. financial system on behalf of banks located in countries subject to U.S. sanctions, including Cuba, Iran and Sudan. On at least one occasion, HSBC instructed a bank in Iran on how to format payment messages so that the transactions would not be blocked or rejected by the United States.
That is, Breuer says HSBC 1) helped Mexican drug cartels launder money and 2) helped Cuban, Iranian, and Sudanese banks avoid US sanctions.
But that’s not all, according to the Permanent Subcommittee on Investigations, that HSBC did. The four main sections of the PSI report on HSBC’s Bank Secrecy Act and money laundering violations pertain to:
- Money laundering for Mexican cartels
- Helping banks evade sanctions
- Processing masses of travelers checks from Hokoriku bank in Japan which had suspicious ties to Russian “businessmen”
- Maintaining correspondent accounts with banks that had ties to terrorism, most notably the Al Rajhi bank
One of the things, according to Carl Levin, that HSBC did was help banks involved in terrorist financing get US dollars (that section takes up 53 pages of a 340 page report). And yet, Breuer’s speech did not once mention the word terrorism. The US Attorney’s release used the word “terror” once, though not in conjunction with HSBC. And the Statement of Facts mentions terrorism in conjunction with a description of the laws HSBC violated and in this one paragraph.
In addition to the cooperative steps listed above, HSBC Bank USA has assisted the Government in investigations of certain individuals suspected of money laundering and terrorist financing.
In short, Lanny Breuer and his prosecutors did not mention that this bank they were letting off without prosecution provided a terrorist-connected bank with US dollars for years.