Why no criminal charges for HSBC, demands Warren

Why hasn’t anyone from HSBC been tried for money laundering?

Further, why is the bank still operating?

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Senator Elizabeth Warren posed those questions yesterday as she testified before the Senate Banking Committee Hearing.

While the HSBC settlement was the largest penalty ever imposed on a bank, the U.S. stopped short of charging executives, citing the bank’s immediate, full co-operation and the damage that an assault on the giant company might cause on the economy.

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“How many billions of dollars do you have to launder from drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution?” she asked. “What does it take to say, we’re going to draw a line and if you cross that line you’re at risk for having your bank closed?”

The Treasury Department demurred.

“The question of pulling a bank’s licence is a question for the regulator,” said Hon. David S. Cohen.

Warren was incredulous. “You have no opinion on when a bank should be shut down for money laundering?” she asked.

Cohen replied, “The actions that we took in the HSBC case we thought were appropriate.”

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Federal Reserve Governor Jerome H. Powell noted the authority to shut down an institution is triggered by a criminal conviction, and said the Treasury only has civil authority.

“We gave the statutory maximum of money penalties,” Powell added, emphasizing the Justice Department would be responsible for criminal prosecution.

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Warren closed with the following: “If you’re caught with an ounce of cocaine, the chances are good you’ll go to jail,” she said. “If you’re caught repeatedly, you can go to jail for life. Evidently, if you launder nearly $1 billion for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night. I think that’s fundamentally wrong.”

Last year, HSBC paid a fine of $28 million to Mexican authorities for non-compliance with money laundering controls. The money-laundering issue stemmed from HSBC’s acquisition of Mexican company Grupo Financiero Bital in 2002.

A U.S. Senate investigative committee reported that in 2007 and 2008 HSBC Mexico sent about $7 billion in cash to the United States. The committee report says that amount of cash indicated illegal drug proceeds.

HSBC Mexico acknowledged that it failed to report 39 suspicious transactions and had been late in reporting 1,729 others.