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Wednesday, 18 March 2015 06:41

France May Criminally Indict a Big Bank, Why Can't the US?

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ahsbcbank(Photo: Michael Fleshman)

Since the great Wall Street bank and financial firm swindle that led to a crash of the US economy in 2008, BuzzFlash has published many an article about the failure of the US Department of Justice (DOJ) to criminally charge banks or executives for practices that led to the economic meltdown.

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Yes, the Department of Justice has levied several of the "too big to fail banks" with large fines. But these fines, even if they are over a billion dollars in some cases, are written off by the banks as the cost of doing business - and in many cases, they are literally written off as tax-deductible expenses for the year that they are paid in. Although the Department of Justice has also negotiated companion agreements to curtail harmful banking practices (in addition to the fines), it is not yet clear how vigorously it will enforce them.  

In addition, the Securities and Exchange Commission (SEC) has levied fines against Wall Street banks in relation to the economic crash and ongoing violations of banking regulations, but the SEC is limited by law to civil - and not criminal - enforcement.

In short, Wall Street emerged from the 2008 near-collapse of the US economy more profitable than ever as a result of a taxpayer bailout - and then what amounted to a financial slap on the wrist from US government enforcement agencies.

In February of 2013, BuzzFlash discussed how the lack of potential criminal prosecution leads banks to believe that serious infractions that they commit are just the cost of doing business:

Matt Taibbi has a devastating piece on how the soon-to-be-departed head of the Department of Justice (DOJ) criminal division, Lanny Breuer, admits that the DOJ won't prosecute banks too big to fail, such as HSBC and UBS – among many others. Why?

Because as Taibbi quotes Breuer: "Our goal here is not to destroy a major financial institution."

Breuer also justified overlooking criminal activity at HSBC (and by implication other banks that have been given fines that amount to slaps on the wrist) with the reasoning that criminal activity must be tolerated to ensure that the international financial/banking system is not disrupted: "Had the U.S. authorities decided to press criminal charges," said Breuer "HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

In December of 2012, BuzzFlash published a commentary on how the global banking giant HSBC was not being criminally prosecuted in the US for knowingly laundering drug cartel money - even building bank teller windows in Mexico that are wide enough for the suitcases filled with cartel money to pass through.

Truthout also published a ten-part series in 2012 on the failed, cynical show war on drugs that the US is sponsoring in Mexico. One of the installments began with a discussion of the profits banks make – blood money. Many of the largest banks appear to willingly welcome drug money with a wink and a nod:

A recent article in The Guardian UK offers evidence that "while cocaine production ravages countries in Central America, consumers in the US and Europe are helping developed economies grow rich from the profits."

According to The Guardian UK story, [a] study by two Colombian professors found that "2.6% of the total street value of cocaine produced remains within the country [Columbia], while a staggering 97.4% of profits are reaped by criminal syndicates and laundered by banks, in first-world consuming countries."

One of the researchers, Alejandro Gaviria said: "We know that authorities in the US and UK know far more than they act upon. The authorities realize things about certain people they think are moving money for the drug trade - but the DEA [US Drug Enforcement Administration] only acts on a fraction of what it knows."

"It's taboo to go after the big banks," added Gaviria's co-researcher Daniel Mejía. "It's political suicide in this economic climate, because the amounts of money recycled are so high."

Most recently, HSBC was exposed for willfully violating US banking laws by allowing and encouraging illegal tax-dodging schemes, using its Swiss private banking branch. Thus far, the US Department of Justice says that it is still investigating the latest disclosures of HSBC's wanton flouting of US banking regulations and the law - and may press criminal charges. However, back in 2012, the DOJ was boasting that HSBC would only face "significant" fines over the tax-evasion practices of its Swiss private bank, according to BloombergBusiness.

It is refreshing, then, to learn from a March 13 article in The Guardian that a French prosecutor has forwarded criminal charges against HSBC for the violation of France's tax-evasion laws, where a special court has also been set up to prosecute rich French citizens who took advantage of the scheme:

The French financial state prosecutor has requested that HSBC’s Swiss private bank be sent to criminal trial over a suspected tax-dodging scheme for wealthy customers.

The recommendation follows a lengthy investigation by local magistrates into alleged tax fraud involving 3,000 French taxpayers and is a procedural step that brings the Swiss banking arm one step closer to a possible trial in France....

The scandal at HSBC’s Swiss bank came to light when the Guardian and other media organisations around the world published revelations from leaked files. The files showed that the Swiss operation enabled clients to evade and aggressively avoid taxes and withdraw “bricks” of cash without question....

Actually, this was the second stage of allegations against the permitting - and even encouragement - of international tax-dodging by HSBC's Swiss bank. As The Guardian disclosed specific accounts and clients that were taking advantage of HSBC's tax-evasion services, the US Department of Justice was still fumbling around, claiming that it was investigating HSBC in Switzerland and negotiating with the Swiss government about its banking secrecy laws. Are we to believe that the US government has - with all the agencies involved in looking into HSBC's activities in Switzerland - less ability to pry open HSBC's Geneva vaults than a British newspaper? Or is DC just dawdling because it doesn't want to prosecute any of the big banks?

According to The Guardian, in response to the latest concrete evidence against HSBC,

HSBC’s chief executive, Stuart Gulliver, has admitted that the revelations are a source of shame and the chairman, Douglas Flint, has said they are “deeply humbling”. The two have pledged to clean up the bank but say they cannot be held responsible for the Swiss bank’s actions.

The Guardian reported that Gulliver had an account at the Swiss private bank and that he also used a Panamanian company to channel his earnings. He admitted the arrangement, which he ended in 2009, looked strange but said it was to protect his privacy and was not related to tax.

The Department of Justice doesn't just need to "humble" bank executives who violate US law. It needs to hold them accountable, and to force their removal from the banking industry if proven guilty - and to remove the charters of the bank in the US when egregious malfeasance is uncovered.

We must take steps to rein in the illicit activities of "banks too big to fail." Even if prosecutions happen, the systemic problems created by capitalism unhinged will remain. However, as we seek larger solutions, we must also work toward holding big banks accountable - recognizing the harm they have inflicted upon this country.