HSBC's lesson: Light punishment awaits offending banks
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The announcement Tuesday that the Justice and Treasury departments had reached a $1.9 billion settlement with British banking giant HSBC after a federal crackdown on money laundering is a travesty. Although the settlement is a record sum, HSBC reaped a profit in the last two years of $38 billion.
A five-year investigation revealed HSBC transactions that violated not only U.S. sanctions against countries such as Cuba, Iran and North Korea, but also substantial business conducted with Mexican drug lords and cartels. Investigators also discovered financial links between the bank and al-Qaida, which launched the 9/11 attacks on the United States.
Given the extent to which HSBC had violated U.S. laws, it is surprising that no criminal prosecutions resulted. Also questionable is the relatively small penalty HSBC will have to pay, 10 percent of its average annual profit.
The reason U.S. authorities gave for imposing such light punishment was that a stiff penalty might have caused the bank, which operates in nearly 80 countries, to cut some of its U.S. employees. Despite assorted violations of banking laws, the U.S. government, under Presidents George W. Bush and Barack Obama, has yet to send senior officials of any major banks to jail.
This will not encourage banks to take U.S. sanctions or regulations seriously. The banks will know, based on the HSBC case, that the potential penalty will be symbolic and not damaging to their bottom line. This is particularly unfortunate since the United States relies more on economic and financial sanctions to try to work its will against evil-doers.
Another consequence of the light hand wielded against HSBC is that it fuels the belief among Americans that U.S. laws are not enforced equally. These are both unfortunate conclusions to be drawn and they reflect sadly on the quality and conduct of justice.
First Published December 13, 2012 12:00 am