Settlement by any other name

Government settlement with HSBC shows danger of too-big-to-fail

The announcement of the U.S. government's decision to settle the money laundering charges against HSBC to the tune of $1.92 billion might have caused gasps around the world, as it is a huge fine and the largest ever leveled, but keep in mind HSBC's U.S. subsidiary alone has $200 billion in assets. Last year's HSBC profits were close to $17 billion. And as Asst. Attorney General Lanny A. Breuer announced, HSBC laundered at least $881 million for drug cartels,  failed to monitor some $670 billion in wire transfers between its Mexican subidiary and U.S. branch, and didn't watch over some $9.4 billion in purchases of physical U.S. dollars from the Mexican branch between 2006 and 2009. So $1.92 billion might seem like a lot, but relatively speaking, it isn't. More incredible is the reason for the settlement: The prosecutors — urged on by the U.S. Treasury and U.S. bank regulators — thought criminal indictments could hurt the bank globally, and thus, because of its size, hurt the global economy.

Money launderers — at least on TV — go to jail, especially when they are washing funds for terrorists and drug cartels. But in real life that doesn't seem to be the case. Although Breuer said HSBC "has replaced virtually all of its senior management, 'clawed back' deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement," I can't help thinking HSBC execs are popping corks all over the world. Replaced "virtually" all of its senior management? "Clawed back" bonuses of those in the thick of things and deferred bonuses? These are punishments? Seems to me, that comes with the territory of breaking the law.

The New York Times reported that prosecutors wanted the bank to at least plead guilty to violations of the federal Bank Secrecy Act, but allegedly U.S. regulators cautioned against it. Regulators, I might add, who dropped the ball in keeping an eye on HSBC's and other banks' bad behavior. Let's hope "virtually" all those regulators have been replaced as well.

HSBC now...Bringing up the bodies

About the Author

In her many years covering the futures industry Ginger has interviewed some of today's best global hedge fund and commodity trading advisors. Ginger received a master's degree in journalism at Northwestern University's Medill School of Journalism and a bachelor’s in communication arts from the University of Wisconsin – Madison

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