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Profit At Any Cost: How Banks Help Drug Traffickers and Terrorists

David Callahan

After years of scandals and abuses, it's hard to be surprised by the criminal behavior of major banks. Typically, though, exposes of bank wrongdoing have focused on their financial shenanigans.

But yesterday, thanks to the dogged work of Senate investigators, we learned that the criminality of some banks goes much deeper, with these institutions servicing drug traffickers and terrorist-linked entities, and circumventing U.S. laws governing ties with rogue states like Iran, Sudan, and North Korea.

All to boost the bottom line.

A new report by the Senate Permanent Subcommittee on Investigations, chaired by Carl Levin, focuses on HSBC and how the global bank, along with its large U.S. affiliate, has flouted federal laws aimed to stopping criminals and terrorists from gaining access to the American financial system.

The report is chock full of acronyms and makes for turgid reading. But dig through the dry, technical prose and a truly shocking picture emerges. Investigators found, among other things, that:

  • HSBC systematically turned a blind eye as its branch in Mexico served as the conduit for moving billions of dollars in cash into the United States even as U.S. and Mexican authorities expressed repeated concern that such a large volume of dollars could only come from drug cartels.
  • HSBC intentionally and repeatedly circumvented controls aimed at preventing wire transfers into the U.S. by people -- including suspected terrorists and drug traffickers -- that Homeland Security had put on a list to bar from utilizing the U.S. financial system. This included 25,000 financial transactions involving Iran.
  • HSBC ignored the objections of its own compliance officials in the U.S. and elsewhere who flagged its illegal behavior and tried to stop it.
  • HBUS, the bank's U.S. arm, allowed several foreign banks to have U.S. accounts "despite evidence of links to terrorist financing." The report states: "Each of these specific cases shows how a global bank can pressure its U.S. affiliate to provide banks in countries at high risk of terrorist financing with access to U.S. dollars and the U.S. financial system."
  • "Over the course of a decade, HBUS opened over 2,000 accounts in the name of bearer share corporations, a notorious type of corporation that invites secrecy and wrongdoing by assigning ownership to whomever has physical possession of the shares.

This particular Senate investigation focused on HSBC, but the clear implication of their findings -- which they dub a "case history" -- is that the problems exposed with HSBC may be widespread. Indeed, there has long been piles of evidence that numerous major banks are involved in money laundering and terrorist financing. 

Two years ago, for instance, Barclays -- a bank very much in the news today -- paid a $298 million penalty to the U.S. government for violating anti-money laundering laws as a result of a global probe that investigated many other banks. As the Wall Street Journal reported:

Nine banks have been caught up in the probe, and some are in discussions to settle, according to a person familiar with the case. Three have already. Last month, Barclays PLC in London agreed to pay $298 million and admitted to allowing payments on behalf of clients in Cuba, Sudan and other countries. Lloyds Banking Group in London and Credit Suisse Group in Zurich—banks that operated extensive transfer systems for Iranian clients—have agreed to settlements totaling $350 million and $536 million, respectively.

These weren't rogue operations. The investigators discovered that the banks ran dedicated units to systematically aid the undetected transfer of money through the U.S. banking system. They did that by removing identifying coding on fund transfers so they could evade automated U.S. bank computer systems designed to spot money flowing from a sanctioned state.

Okay, just stop and read that last paragraph again.

On one side, we have the U.S. Department of Homeland Security desperately waging a fight, ever since 9/11, to keep terrorist money out of the United States so that it can't be used to finance new strikes on our soil. And, on the other, we have leading global banks actively helping banned persons and entities get money into this country -- often with the help of their U.S. affiliates which are often staffed, of course, by Americans.

It's one thing for bankers to conspire to rip off their fellow citizens financially. But this goes further and sounds more like, well, treason.

One thing is for certain. After these shocking new revelations, top bank executives will face harsh criminal penalties and be held personally responsible for putting the lives of Americans in danger.