How HSBC Bank Got Away With Money Laundering for Drug Cartels
The illicit drug trade relies heavily on money laundering because it is almost exclusively a cash business. Drug interdiction, while an essential component of attacking the illicit drug trade cannot, standing alone, reverse the tide of illicit drugs. Combating money laundering, combined with strong interdiction efforts, offers a more effective law enforcement response.
- Money Laundering in Florida: Report of the Legislative Task Force, 1999
Stuart Gulliver, the Chief Executive of the London-based international banking giant HSBC said: “We accept responsibility for our past mistakes. We have said we are profoundly sorry for them and we do so again… What happened in Mexico and the US is shameful, it’s embarrassing, it’s very painful for all of us in the firm…The HSBC of today is a fundamentally different organization from the one that made those mistakes.”
What was Mr. Gulliver apologizing for and was he sincere? His bank got caught laundering tons of cash for drug cartels and alleged terrorists. That is a crime.
Lanny Breuer, the Assistant Attorney General for the Department of Justice (DOJ) explained at a press conference, “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… The record of dysfunction that prevailed at HSBC for many years was astonishing.”
U.S. Attorney Loretta Lynch added, “HSBC’s blatant failure to implement proper anti-money laundering controls facilitated the laundering of at least $881 million in drug proceeds through the U.S. financial system…”
As punishment, HSBC was assessed a fine of 1.9 billion — about four weeks’ worth of its pre-tax profits. No bank officials who were caught red-handed will be prosecuted or imprisoned.
Take responsibility, apologize, pay a fine for your drug crimes and then call it a day. Go home to family who will forgive you for doing business with so-called “narco-terrorists.” Prison time? Felony record? Asset forfeiture? No. Not for drug trafficking executives of laundromat/banks that are “too big to fail” or jail.
It is not so for those individuals and organizations that provide other, equally vital services to the $400 billion illicit drug trade. From the heads of Afghan drug cartels, to drug couriers like the Panamanian woman who had cocaine implanted in her breasts, to injection drug users in America’s needle parks, they will be demonized as purveyors of poison and death then punished severely. They won’t go home for a very long time, if ever.
The U.S. justice system will mete out life sentences without the possibility of parole or mandatory minimum sentences of decades to drug kingpins, mules and the drug addicted. Drug law offender’s lives behind bars will become a dystopia that the profits of the privatized correctional industries depend on.
The convicted will be disappeared in to twenty-first century concentration camps in remote, rural towns. Some prisoners will end up in solitary confinement and be driven mad. Their children will be orphaned and their families destroyed by shame, lack of visitation and communication.
Everything will be legally stolen from drug law violators. Cars, jewelry, family heirlooms, clothes, cash, homes and property will be seized and put up for sale to benefit various branches of law enforcement.
Check out the Asset Forfeiture Program at the DOJ website. You can bid on Rita A. Crundwell’s farmland in Dixon, Illinois. If you prefer a warmer climate, there is beachfront property for sale in the Dominican Republic.
Admitting guilt, apologizing, promising “fundamental” change and paying a financial penalty will not suffice for the poor, low hanging fruit convicted of drug crimes. They have to be taught a “tough love” lesson in zero tolerance, and this: “You do the crime, you do the time.”
This stripping the person of everything that connects them to society and to other human beings and locking them up in spaces smaller than a bathroom has to happen because as the Mission Statement of the Drug Enforcement Administration (DEA) asserts, those involved in the drug trade are criminals who “…perpetrate violence in our communities and terrorize citizens through fear and intimidation.” The DEA and the DOJ’s unapologetic modus operandi in the forty-year long War on Drugs is, Lock ‘em up and throw away the key!
Except when the criminals are rich, well-connected bankers who wash drug trafficker’s dirty Benjamin Franklin’s clean. Tough on crime and the rule of law doesn’t apply to them.
DOJ attorneys argued that aggressively prosecuting HSBC could destabilize the entire international banking system. Breuer said in an interview with the Washington Post, “If you prosecute one of the largest banks in the world, do you risk that people will lose jobs, other financial institutions and other parties will leave the bank, and there will be some kind of event in the world economy?” In other words, banks that break the law by laundering money for drug cartels and rogue states are immune from criminal prosecution because a global financial meltdown could be triggered.
But that didn’t happen twenty-five years ago when the Bank of Credit and Commerce International Bank (BCCI) was prosecuted for laundering drug profits. Like HSBC, BCCI did business with an international cast of unsavory drug dealers and dictators. BCCI helped former Panamanian dictator Manuel Noriega and the Columbian Medellin cocaine cartel convert millions of dollars into pesos. An aggressive investigation led by Senator John Kerry and New York District Attorney Robert Morgenthau concluded that BCCI was “one of the biggest criminal enterprises in world history.”
BCCI was indicted for money laundering, grand larceny and bribery. Bank branches were shut down in seven countries and restricted in dozens more. The criminals at BCCI were punished and effectively put out of business. They got drug war tough love and the world banking system didn’t crash.
The convictions almost didn’t happen. The Bush Administration only wanted a slap on the wrist for BCCI, but Kerry was apoplectic. He went on national television slamming the hypocrisy: “We send drug people to jail for the rest of their life, and these guys who are bankers in the corporate world seem to just walk away, and it’s business as usual…When banks engage knowingly in the laundering of money, they should be shut down. It’s that simple, it really is.”
That was in 1999. Where is Senator Kerry and the rest of Congress’s outrage for the career drug criminals at HSBC that facilitated the illegal deposit of millions of dollars packed into specially designed boxes that would fit through the bank’s teller windows in Mexico?
Why isn’t the Senate Permanent Subcommittee on Investigations that accused HSBC of exposing the United States “financial system to money laundering and terrorist financing risks” and for violating the Trading With the Enemy Act screaming hysterically that those who fund “narco-terrorism” must be punished to keep America safe?
The most Congress could muster was a letter written by Rep. Barney Frank to Attorney General Eric Holder asking him to reconsider the agreement with HSBC. A letter. Wow! That’s tough on crime?
How come the nation’s top drug warrior Michelle Leonhart, Administrator of the DEA, isn’t demanding that HSBC officials pay for their crimes? According to an investigation by Immigration and Customs Enforcement (ICE), from 2006 to 2010 the bank laundered millions in profits for the Sinaloa drug cartel in Mexico and the Norte Del Valle cartel in Columbia through the Black Market Peso Exchange (BMPE.)
And why isn’t Leonhart extraditing Gulliver and other senior bank executives to the United States to face drug trafficking and narco-terrorism charges?
The DEA and the DOJ gloat in their ability to extradite or simply seize alleged drug kingpins from all over the world and bring them to the United States to stand trial – especially suspects from Afghanistan and Latin America. They’re not concerned about the impact that these extraditions will have on the international drug trade. The consequence is often an uptick in violence and murder as internecine fighting erupts to reconfigure drug markets.
The case of Haji Bagcho, a 70-year-old Afghan man convicted of drug trafficking and narco-terrorism reveals the double standard of the DEA and the DOJ when it comes to who they chose to criminally prosecute for drug crimes. Afghan drug traffickers are shown no leniency, are never offered sweetheart deals and are prosecuted to the full extent of the law.
Both Breuer and Leonhart expressed outrage and contempt for Bagcho’s alleged crimes. Breuer said, “Haji Bagcho led a massive drug production and trafficking operation that supplied heroin in more than 20 countries, including the United States. In 2006 alone, he conducted heroin transactions worth more than $250 million. Today’s life sentence is an appropriate punishment for one of the most notorious heroin traffickers in the world.”
Leonhart added with her usual bravado, “This is DEA at its finest, working in close collaboration with our Afghan partners to end the long reign of this Afghan drug lord whose drug proceeds financed terror. One of the world’s most prolific drug traffickers who helped fund the Taliban will spend his remaining days behind bars in a U.S. prison…”
Now imagine those words being hurled at Mr. Gulliver and his “massive” operation (HSBC has branches in 85 countries) “whose drug proceeds financed terror.” Imagine “notorious,” high-level HSBC officials spending their “remaining days behind bars in a U.S. prison.” Hard to imagine isn’t it?
But not for Afghans like Haji Bagcho or Haji Bashar who was also given a life sentence even though he cooperated with the DEA and the DOJ. And there’s Haji Juma Khan. He’s been held in solitary confinement awaiting trial since he was extradited to the United States in 2008. Incarcerating Bagcho, Bashar and Khan hasn’t weakened the Taliban or made a dent in the Afghan drug trade. Afghanistan retains its premier position as the number one grower of poppy and exporter of heroin to Central Asia and Europe. Moreover, Afghans are involved in the illicit drug trade out of economic necessity as are Mexicans, because the legal economies in both countries are in shambles. British bankers have no such reason – their motive is pure greed.
It is a mathematical certainty that as long as drugs are illegal, banks will continue to launder drug trafficker’s money. Superprofits are guaranteed and the financial penalties aren’t a deterrent.
The HSBC scandal shows how the illicit drug trade is completely integrated into the world financial system. I In the face of the enormous economic power of the global banking industry to circumvent anti-laundering regulations, winning the war on drugs is utterly futile.
The only solution is to legalize and regulate the sale of all drugs. It is an inescapable reality that heroin, cocaine, methamphetamine and marijuana are global commodities that cross all borders. Millions of people buy drugs and making them illegal has never stopped the use or abuse of them.
Ending the war on drugs would not only save human lives and billions of dollars, it would free up law enforcement agencies to investigate and prosecute banks whose real crimes are far worse than laundering drug money.