If you're suspected of drug involvement, America takes your house; HSBC admits to laundering cartel billions, loses five weeks' income and execs have to partially defer bonuses

Rolling Stone's Matt Taibbi is brilliantly incandescent in his column about the HSBC drug-money-laundering settlement with the US government. HSBC was an active, knowing participant in laundering billions in drug money, and was fined a small percentage of its net worth (five weeks' income). Meanwhile, private individuals who are suspected of being incidentally involved in the drug trade routinely have all of their property confiscated, down to their houses and cars, under America's insane forfeiture laws. Then they often go to jail.

It doesn't take a genius to see that the reasoning here is beyond flawed. When you decide not to prosecute bankers for billion-dollar crimes connected to drug-dealing and terrorism (some of HSBC's Saudi and Bangladeshi clients had terrorist ties, according to a Senate investigation), it doesn't protect the banking system, it does exactly the opposite. It terrifies investors and depositors everywhere, leaving them with the clear impression that even the most "reputable" banks may in fact be captured institutions whose senior executives are in the employ of (this can't be repeated often enough) murderers and terrorists. Even more shocking, the Justice Department's response to learning about all of this was to do exactly the same thing that the HSBC executives did in the first place to get themselves in trouble – they took money to look the other way...

... So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That's the punishment? The government's negotiators couldn't hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them "partially" wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department's opening offer – asking executives to restrict their Caribbean vacation time to nine weeks a year?

...How about all of it? How about every last dollar the bank has made since it started its illegal activity? How about you dive into every bank account of every single executive involved in this mess and take every last bonus dollar they've ever earned? Then take their houses, their cars, the paintings they bought at Sotheby's auctions, the clothes in their closets, the loose change in the jars on their kitchen counters, every last freaking thing. Take it all and don't think twice. And then throw them in jail.

Outrageous HSBC Settlement Proves the Drug War is a Joke (via Dan Hon)

(Image: [HSBC], a Creative Commons Attribution (2.0) image from willsurvive's photostream)


  1. This outfit has been my bank for nigh on 20 years.  Looking for alternatives now, because (1) I’m disgusted, and (2) my standard response to people telling me drugs’r’ok’n’don’hurtnoone is ‘of course they do – total networked pyramid criminal money pile thing connected to all sorts of other nasty activities and recruitment of kids etc’

    1. If you’re going to use the “networked pyramid” theory of moral liability, I’m afraid there are a whole lot of things other than illegal drugs that you’re going to have to eschew. There is very little, if anything, in the First World that is morally clean, if you follow the chain of morality very far at all. You have to draw the line somewhere. If you’re okay burning oil, it’s probably no worse if you’re okay smoking pot or snorting coke.

      1.  I wonder if the “networked pyramid theory of liability” works like Amway. Everyone on the bottom gets screwed while the top makes out like bandits.

      2. Gotta start somewhere.

        By de-criminalizing, you take out the hyper-profits you can make from running a coke operation, and the risk/reward assessment gets skewed in favour of shutting up shop and shipping out to the Caymans.  Maybe then the kidz who get recruited into the operations have to find something else to do, and the little kidz who look up to those kidz no longer have the wrong type of role models.

        Over time, the entire structure weakens and, although you may not have less crime, you have less organisation behind it.

        I think humans in general have an issue with moral cleanliness.  The key is to provide ways of living that diminish the impact of moral uncleanliness (whatever that might be defined as).  Like green energy.

        Your oil / coke distinction doesn’t quite work in my frame – the point I’m making is that any activity in the illicit economy, and especially ‘illegal’ drugs, is financing an enormous, hungry system that destroys youngsters’ lives before they have a chance to do something else.  They’re just way too attracted to the fast money, although they won’t really make any.  I know too many middle class wankers who help finance human trafficking, prostitution, vehicle theft, burglary, oppression, whatever you like, simply by snorting coke at the weekends.

        It’s not a moral thing – it’s factual.  I don’t care about the ethics or the morals of the snorters; I care about the naive people young and old who get sucked into the system.

        Oil – yes, it pollutes, and to be fair, I use as little as I can.  It’s warming the earth, yes.  But, although the corporations obtaining and delivering it are corrupt and greedy, that very system does not permanently morally influence young minds.  And I’m sure we’re all working hard to figure out how to get greener every day.

  2. I wonder how much laundered drug money is spent on lobbying for keeping the current drug laws…

    With the apparent upcoming legalization of marijuana throughout our county (I’d guess within 5-10 years) dealers are going to lose a bunch of cash to Phillip Morris, Diageo and the other tobacco/alcohol “vice” companies that are bound to take over the legal growth/distribution/taxation.

    This will also solve a big part of the “pyramid criminal money pile thing.”

  3. Two-tiered justice system, one for HSBC and Lindsay Lohan and one for everyone else. America is rotten to the core. We have rotten leaders in a rotten capitol in a rotten country with rotten citizens. Nothing will change because no one cares.  What are the headlines today? Kardashian blah blah… where’s HSBC? Forgotten already.  Maybe we should all just become criminals–if you can’t beat them join ’em.

    1. Seeing as they only forms of reparation left to us are criminal, only one choice remains: What kind of criminal organisation do we form?
      I vote for an eventual crime-fighting, ‘The Shadow’ style enlightenment following a complete take over of the East Asian heroin trade.
      Who knows what evil lurks in the hearts of bankers?
      The Shadow knows!

      1.  …there’s a lot of us in a loose organisation, so technically it would be more of a League of Shadows.

  4. It is nice to see a prime example of the High Court/Low Court system.

    Setup a lemonade stand, get raided by the police and demands to pay hundreds for a license.
    Knowingly sell tainted food product, and the FDA still has to ask nicely for you to recall it, I mean if you want to and stuff.

    1. “Corporation, noun: An ingenious device for obtaining individual profit without individual responsibility.”
      — Ambrose Bierce

  5. I’m almost as amazed at this story as the bankers must be that we just keep taking it.
    Laughing all the way to the bank.

  6. Hopefully the DOJ is getting some very close cooperation for infiltrating/dismantling criminal infrastructure out of this deal, but IANA expert on this stuff so I have no idea if these types of deals are worthwhile, so your mileage may vary.

    1. Do you recall the close and generous cooperation the banks responded with after the feds bailed them out from the mortgage crisis?  No?  Me neither…

  7. It’s this sort of thing that makes me think we need a corporate death penalty. If a corporation does something particularly egregious kill it – all shareholders lose out, creditors get nothing, the assets are liquidated, and proceeds are forfeit to the government – and send all the executives who knew or should have known to jail as if they’d done it personally.

    You may ask why the creditors get nothing. How well do you think creditors of someone who’s on death row come out? Same thing. Be careful of who you do business with or loan money to.

    1. So the beneficiaries of corporate execution would be the government? What is to keep corrupt members of the government from doing this to steal the money? It’s the sort of thing that happens all the time.

        1. It should go to the rank and file minions(edit: employees and customers alike) that had no legitimate idea in the form of severance and job search services. And then to pay down the debt.

    2. Doing that to a company like HSBC would wipe out the individual savings of millions – maybe even billions – of people. Not to mention, wreck the whole infrastructure of thousands of other firms that depend on them.

      Maybe it’s fair to ask how we ever allowed them to become so critical, but the fact is that they are.

      That said, I don’t see any reason that the top management of the corporate needs any kind of immunity. Break the corporate veil, throw each and every executive who signed off on this into jail, along with a substantial portion of the board (leave the independent directors – they usually don’t have the information). Oh, and bring in new management and break the company into three or four pieces so that they’re not so critical to the world economy anymore.

      “Too big to fail” is a failure of regulation – we should never have allowed them to get there in the first place.

      1. The whole point of incorporation is to shift losses away from the rich and into the laps of the middle class and poor.

        1. that is certainly one interpretation.

          a less cynical view would also note that it allows those without massive wealth to take risks in business that would otherwise threaten them with loss of everything they own.

          both perspectives are probably true.

          1. Then there should be a reasonable dollar limit on it. As it stands now, you can walk away with a billion dollars in the bank while your stockholders and workers lose everything.

        2. Actually, incorporation serves a useful legal purpose – it makes it possible to address a company as an entity instead of trying to name its constituents individually. This is different from corporate personhood, which is (apparently) a stupid American concept where corporations were hacked into the constitution by way of a rather vague interpretation of the 14th amendment… In other countries (India, for example), corporate persons do not enjoy fundamental rights. They’re only a way to make things like court cases and legal agreements easier.
          The concept of limited liability is entirely different. An unlimited liability entity (say, a partnership without LL) would still be considered a legal entity for the same purposes. Only, if it gets into trouble, the partners are both in equal trouble to the extent of their investment.

          I think limited liability only serves a useful purpose in terms of shareholders in a large(r) firm, who may not have direct involvement with the running of the firm. We can only put the HSBC management behind bars, not all of its shareholders.

          The management and board that perpetuated these criminal acts should be made liable to the full extent, and the general body of the company – its shareholders – should be made to elect a new board. Also, the company itself should be penalised by means of large fines that should serve as a signal to the general body to not elect criminal managements anymore.

          I’d be happier if the rank-and-file employees got a share in the decision making somehow, too.

      2. Another solution is to simply limit the liability of individuals to that of corporations. We’re all people in the eyes of the law.

        I mean, isn’t it unfair to throw my entire body in prison for something only my hands and brain had much to do with? The kidneys, liver, duodenum… all totally out of the loop. 

        Also, think of how it would affect the economy, the entire household’s GDP would plummet!
        All I’m saying is either all  “persons” get limited liability or none of us do…

        1. The simplest solution is to do away with corporate “personhood”, and allow them to be “entities” – addressable legally, but with no inherent rights beyond what’s explicitly granted. They would be a convenient way to create legal agreements and to sue, but nothing more.

          1. That doesn’t actually address the limited liability problem, personhood isn’t what gives them the ability to commit horrendous crimes with the prospect of very limited punishment, limited liability is a luxury afforded to more or less all registered companies and would not be affected if corporate personhood were eliminated.

          2. Limited liability is only for the shareholders – they aren’t liable because the management of the company has decided to do something illegal.

            What I mean is that company management and employees should be held criminally liable far more often than the US seems to do. A “Corporate Person” didn’t commit these crimes – actual people did. Those people need to be booked, by piercing the corporate veil and addressing the actual individuals involved.

          3. @shashwash:twitter Unfortunately, in very large organizations individual accountability can’t really exist in the traditional sense. When you say “actual people [committed the crime]”, that’s not true in the traditional sense of the word. What happened here was very likely a case of oversight slowly being relaxed over multiple years in multiple parts of the firm until something like this became inevitable. 

            The crime wasn’t necessarily committed by actual persons, its entirely possible that no single individual broke the law in any more than a very minor way. 

            The crime was committed by the organization. 

            Limited liability means that the owners are not responsible for crimes committed by their organizers. That means that at the end of the chain of accountability, there stands, no one.

      3. Saying a thing is “too big to fail” is like saying a morbidly obese person is “too fat to diet”.

        1. “Too fat to fall” (without hurting somebody on the pavement below) may be more like it.

          The abrupt death of HSBC would hurt far more than HSBC’s own shareholders and employees alone. That’s my concern with simply passing a “death sentence”.

          As I said, the first question to ask is why they became so big…

    3. There’s a judicial death sentence, which I think you’ll agree, isn’t going to happen. But I can fantasize about the first few pages of Bruce Sterling’s _Distraction_: vigilante justice on a white collar scale!

    4. We already have a workable concept for this in the form of nationalisation.

      1. In a way, that’s what happened with Satyam here. The government (the Company Law Board) effectively fired and then barred the then-board of Satyam, appointed their own nominees to the board, which then elected a new CEO, and then eventually sold the company to Tech Mahindra.

  8. Give it up, folks. You are all fleas talking about prosecuting the dog. It ain’t never going to happen, never has, never will.

  9. This is why I don’t respect this country’s laws anymore. I do what I want. If the guys at the top don’t follow laws, I won’t either. Sharpening my pitchfork and waiting to storm the castle.

  10. I find it difficult to join in on Matt Taibbi’s hysteria. 1. because we shouldn’t be fighting a war on drugs anyway, in which case this wouldn’t even be a problem; 2. Is the US now reliant on banks doing a job that would be better handled by law enforcement?

    This is the same sort of thinking that leads to telecom companies reporting on network traffic and IP addresses for the benefit of the RIAA and MPAA.  Or the UK government wanting all network communications to be automatically logged under the guise of stopping criminals and terrorism.  I can’t endorse that, so I’m not comfortable with banks monitoring everybody’s activities and reporting them to the government either.

    1. The point isn’t that the banks aren’t doing a good enough job, the point is that if you commit a certain offense, you lose everything, when a powerful “person” commits the same offense, they lose nothing. 

      This is important regardless of whether its money laundering, turning babies into dogfood, keeping an ice cream cone in your pocket or quite literally anything else that may happen to be against the law at any given time. 

      The intensity of your hysteria should be completely independent of your opinion about the law, this is a question of the most fundamental functioning of the justice system, of whether or not justice is blind.

    2.  Helping the cartels turn a profit off of murder and helping terrorists fund their insanity is a bit beyond “the war on drugs”, and the fact that these motherfuckers are going to get away with it…

    3. You are missing the point entirely. It’s not about banks monitoring everyone’s activities, they already do. Transactions over a certain amount are flagged and reported. This is about who is monitoring the banks, and the consequences that they face when they flagrantly and repeatedly break Federal laws for immense profits. You or I would go to prison for a very long time (and lose all our property even before convicted). Under seizure laws, we would have to prove our innocence, not the other way around, before we got that property back- if it was ever returned.

      If corporations are people, they certainly have all the benefits of personhood without any of the drawbacks. In “The Corporation”, the filmakers compare them to sociopaths, which is spot on. They have no conscience, and why should they? It’s all about profit, and if the punishment costs (let’s just say a shitload) less than the crime pays out, then it’s perfectly reasonable.

    4.  We shouldn’t be fighting a war against drugs, granted.  But we should absolutely be fighting a war against these Los Zetas assholes that have taken control of northern Mexico and have beheaded hundreds or thousands of people as an example of what happens when you stand up to Los Zetas.  They are a vicious criminal organization, not Joe Pot Dealer down the street.  This is a story about a major international bank laundering money for a drug gang that is far more organized and deadly than, say, Al Qaeda. 

      ANd it’s not at all about getting banks to enforce laws.  It’s about holding banks accountable for laws that banks break.  I don’t know how you could miss the point so spectacularly on that score.

      Please try to get some perspective on this issue.

      1. Down to 101% of whatever your income is, perhaps?

        Your comment brings to mind the old Russian joke in which a genie offers to grant a poor peasant his heart’s desire.

        “My neighbor has this beautiful cow that produces bucketfuls of milk,” says the lowly farmer. “He sold the milk and bought a bull. Now he has a whole herd of cows . …..”

        “I get it!” the genie interrupts, “your wish is to have a herd like your neighbor’s.”

        “No,” the baffled peasant replies. “I want you to kill my neighbor’s cows.”

  11. “A woman who fled war-torn Somalia as a child was sentenced Tuesday to eight years in prison for sending $1,450 to members of a terrorist organization in her native country.”

    But HSBC is the worlds third largest bank and the sixth largest publicly held company…

    So basically: poor people get the boot to the neck, and rich people get the finger wag.

    Who is surprised by this?

  12. Anyone remember the song “White Lines” by “Grandmaster Flash”…
    A street kid gets arrested, gonna do some timeHe got out three years from now just to commit more crimeA businessman is caught with 24 kilosHe’s out on bail and out of jailAnd that’s the way it goesRaah!

  13. I’ll believe a corporation is a person when we execute one! Shoot, this looks like the perfect opportunity. How much more does a corporation have to do to get actual justice as is would be delivered to a “person”? 

  14. Eventually the criminal conspiracy is no longer able to hide its own existence. By which time it’s no longer necessary to hide at all.

    1. As has already happened with Mafia… They moved from “conspiracy theory” to “self-evident fact” only after they managed to convert most of their dealings into legitimate businesses (hello, Las Vegas).
      The same thing is happening here; this would be pure “conspiracy theory” not worthy of any “sane person’s” consideration just 5 years ago… and there were people yelling about it back then but they were just “conspiracy theorists” and who would listen to those nut-jobs?

      1.  Didn’t Citibank get busted for the same thing (as in “having binders with official protocols for laundering drug money on letterhead”) more than 5 years ago?

    1. don’t visit HSBC websites and AdChoices won’t pick it for you. I’m so sick and tired of ‘The Great Courses’ that I may never order from them again. (and yes, i found your post funny)

  15. so since you and me cannot obviously leverage the system for or against something, lets withdraw our money from HSBC and sit back and watch how much that hurts in 3… 2… 1…

  16. When the G20 decided to crack down on Money Laundering, the US agreed to crack down on New Jersey and the Caribbean, China agreed to crack down on Hong Kong and Macau, the EU agreed to crack down on Switzerland, Lichtenstein, and Luxembourg.  But the G20 didn’t count on the UK stepping in to take the business opportunity.  HSBC is Hong Kong and Shanghai bankers operating out of London where they are protected from the Chinese crackdown.

  17. Bah, conspiracy theorists yelling about international banking-government-drugs collusion. Pathetic paranoid deluded dopes. /fangs dripping with sarcasm
    Remember, there was no Mafia in the US while good old J.Edgar was alive. It was also considered to be “a conspiracy theory” by all the “reasonable” people.

  18. “Laws are like cobwebs, which may catch small flies, but let wasps and hornets break through.” — Jonathan Swift.

  19. Isn’t this just business as usual for the Hongkong and Shanghai Banking Corporation?  I thought drug money was always kinda their thing…

  20. Isn’t it odd that a corporation is a person when it comes to influencing political parties by handing out mountains of cash (sorry free speech) but they are protected by the ‘corporate veil’ when it comes to their liabilities and responsibilities stemming from their own criminal activity?

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