Banks Are “Where the Money Is” in the Drug War

“Big Lenders Face Few Hard Consequences for Violating Anti-Money Laundering Laws”

By Bill Conroy

banks1Citigroup, JP Morgan Chase & Co., Wachovia (acquired by Wells Fargo in 2009), HSBC Holdings, ING Bank, Standard Chartered, American Express Bank International, and not a few others, have a common bond beyond ranking among the largest banks in the world.

All have been accused within the past five years (and several this year) of failing to comply with US anti-money laundering laws — thereby enabling, collectively, hundreds of billions of dollars worth of suspicious transactions to move through the banking system absent adequate monitoring or oversight.

Yet not one these banks, nor any of their top executives, has been hit with criminal sanctions.

banks2All, with the exception of Britain’s HSBC  (which is still under investigation), have agreed to pay fines for their alleged transgressions after being served cease-and-desist orders or have entered into so-called deferred-prosecution pacts — under which a lender agrees to pay a fine and to comply with the law going forward in exchange for dismissal of all charges at the end of a specified government monitoring period.

But again, not one bank has been charged with a crime nor have any top executives been forced to do the perp walk, bound by handcuffs, in front of the adoring media throng.

Imagine if you or I were pulled over by the cops while transporting in the trunk of our car even $10,000 in bills that traced back to individuals suspected of being involved in illegal activities, such as narco-trafficking. What are the odds that we would walk away with only a traffic ticket?

That’s essentially what is happening in these cases involving big banks, who, for all practical purposes, are allowing their money transportation systems to be rented, for a fee, by criminals, while the banks’ leadership pleads ignorance: “I didn’t know that money was in the trunk. I’ll have to look into that.”

Now, if you take that same $10,000, or even millions of dollars, and put it inside an armored car under contract to a big bank, suddenly the dirty money gains the presumption of legitimate commerce, and is likely to have a police escort as opposed to being subjected to a police inspection.

“All financial crime has a money laundering component,” says Charles A. Intriago, president of the Miami-based Association of Certified Financial Crime Specialists. “… If you’re an individual, and get caught, you get hammered.

“But if you’re a big bank, and you’re caught moving money for a terrorist or drug dealer, you don’t have to worry. You just fork over a monetary penalty, and then raise your fees to make up for it.

“Until we see bankers walking off in handcuffs to face charges in these cases, nothing is going to change,” Intriago adds. “These monetary penalties are just a cost of doing business to them, like paying for a new corporate jet.”

Broken System

The world’s financial system is incredibly complex and capable of moving trillions of dollars in many directions, across multiple borders, with the push of a button in our digital age, making it difficult for banks to truly know their customers in all cases.

Still, the law demands that they do just that, and have systems in place to assure against money laundering.

From the regulators’ perspective, suspecting that a transaction is dirty is not the same as proving it is so. Financial crimes, by design, are hard to track and involve a considerable expenditure of law enforcement resources to investigate and litigate.

Bryan Hubbard, a spokesman for the US Office of the Comptroller of the Currency (OCC), which regulates national banks, when interviewed by Narco News, stressed that his office is charged with enforcing a wide range of legal and regulatory matters, and has a number of enforcement actions underway at any given time, but it does not have a “special focus” on money laundering — though, he adds, the OCC is committed to enforcing anti-money laundering laws.

Given the reality of scarce resources, anti-money laundering laws depend, in large measure, on having the banks police themselves — by assuring that suspicious activity reports are filed with regulators when transactions exceed certain monetary thresholds or don’t pass the smell test, or that compliance departments are well-staffed and on top of their systems.

The problem, however, is that there are many holes in that system, due, in large measure, to lax enforcement by overworked or even incompetent regulators — with the added problem that some of those regulators see the lenders they regulate as potential future employers.

For example, there’s the case of HSBC (the subject of a recent US Senate investigation focused on suspected money-laundering activities). One of the former chief compliance officers for the lender's US subsidiary (called HBUS) served previously as a bank examiner for the OCC, US Senate records show. In addition, two of HBUS’ past Anti-Money Laundering directors worked previously for the US government — one as a federal prosecutor and the other as a US Treasury official.

And, in equal measure, similar power-relationship problems exist within bank compliance departments, whose employees can put at risk millions of dollars in revenue if they aggressively pursue money-laundering suspicions — with another downside being that if they are wrong, they risk angering powerful bank customers as well as their bosses…

Read the entire damning article by my favorite investigative journalist Bill Conroy here at Narco News: Click Here

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  1. Of course there is a big problem with SEC and financial fraud and law breaking. It’s rampant and few are investigated, fewer end in indictments, fewer face trial, and none of them got more than a slap on the wrist if that after a trial which may have come many years after the crimes were committed.

    Our justice system does not work. PERIOD. FULL STOP.

    And neither do most of the institutions of democracy nor the capitalist system in general (the later works fine for capital… they will it all… while the workers pay)

    What’s the solution? We all know the problem?

    Can banking be nationalized? Is that any better? Shall we outlaw all sorts of financial instruments such as derivatives, puts and calls? How bout getting rid of interest or make it unlawful to charge more than 2%?

    We see the problem… what are the solutions that can actually be achieved?

  2. Bill Bergman says:

    Here’s one route, SanderO. See especially chapter XVI: Free Banking

  3. There are many problems of course in the finance system and key among them is the need to create more money as the population increases and more things are created which are transacted with some sort of *legal tender*. Fractional reserve is an idiotic and at the same time very clever means for banks to create money (and wealth for themselves) out of thin air… but it’s all driven by the notion of credit and interest.

    Credit and interest is what got us into the mortgage crisis because everyone was rushing out to buy on credit since few can afford to pay for a big ticket item. But they got carried away with it and bundled it and sliced and diced the bundles into derivatives and in no time flat investors and banks were trading financial instruments which had no underlying value. It was the emperor’s new clothes on steroids and it was fine as long as those at the table accepted the fiction and there was no one cashing in their chips… the game went on the the stakes got higher and higher.

    Finance became the largest part of the economy… and there is nothing tangible produced and very little labor involved… but transactions are in the tens of millions to billions and even made by computer algorithms. The more you have… the more you make… And nobody is calling these frauds out on anything. Remember the S&L? Enron? Always the same frauds… and they all walk away as if nothing happened.

    I don’t think the system can reform itself with regulations… enforced. It’s too far gone and too self corrupting. Toss it all out somehow and start anew. The whole thing is collapsing anyway.

  4. Castillonis says:

    If you are interested in this subject, you might read this ebook or book which is available on Amazon.
    author: Robert Mazur
    title: The Infiltrator: My Secret Life Inside the Dirty Banks Behind Pablo Escobar’s Medellín Cartel.
    Publisher: Little, Brown and Company; 1st edition (July 27, 2009)

    He discusses the difficulty in working your way up the supply chain
    1. Poorly forged undercover identities
    2. Lack of budget
    3. Different region / city offices wanting credit for a bust that can blow you cover.
    4. Management mostly concerned with their personal promotion.

  5. Here is one possible solution: The Wall Street sales tax.

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