The Justice Department this week announced that it will settle with mega-bank HSBC over charges that the bank facilitated money laundering by drug cartels and terrorist organizations. The bank will pay $1.9 billion as part of the settlement.
The New York Times reported that prosecutors were hesitant to do more because “criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.” In a statement released yesterday, Sen. Chuck Grassley (R-IA) blasted the settlement as a “get-out-of-jail-free card” for the bank:
The Department has not prosecuted a single employee of HSBC—no executives, no directors, no AML compliance staff members, no one. By allowing these individuals to walk away without any real punishment, the Department is declaring that crime actually does pay. Functionally, HSBC has quite literally purchased a get-out-of-jail-free card for its employees for the price of $1.92 billion dollars.
There is no doubt that the Department has “missed a rare chance to send an unmistakable signal about the threat posed by financial institutions willing to assist drug lords and terror groups in moving their money.” One international banking expert went as far as to argue that, despite the “astonishing amount of criminal behavior” from HSBC employees, the DPA is no more than a “parking ticket.”
A former banking regulator added that it is “mind-boggling” how the Department believes that “you can have a financial system and allow this kind of impunity.” Future bank employees with a choice between following the law or profiting from illegal activities will have been taught the lesson that they will never face prison time for their actions. Consequently, this DPA does little to discourage future lawbreakers, and leaves the U.S. financial system highly vulnerable to exploitation by drug cartels and terrorists.
Grassley has consistently opposed settlements that let big banks avoid public accountability. When a judge rejected a settlement between Citigroup and federal regulators, Grassley said, “Judge Rakoff is right to ask for information. The SEC needs to provide a clear rationale for the enforcement penalties in this case and in others. Otherwise, the public is in the dark about whether the settlements are adequate and the court’s role is reduced to a rubber stamp. A settle and slap-on-the-wrist approach has not and will not deter the defrauding of investors.”
Prosecutions for financial fraud hit a 20-year low in 2011.
Sen. Jeff Merkley (D-OR) agreed:
“I am deeply concerned that four years after the financial crisis, the Department appears to have firmly set the precedent that no bank, bank employee, or bank executive can be prosecuted even for serious criminal actions if that bank is a large, systemically important financial institution,” wrote Merkley. “This ‘too big to jail’ approach to law enforcement, which deeply offends the public’s sense of justice, effectively vitiates the law as written by Congress. Had Congress wished to declare that violations of money laundering, terrorist financing, fraud, and a number of other illicit financial actions would only constitute civil violations, it could have done so. It did not.”