| HN Mirror

1) The fundamental problem is that countries, especially the US, have basically made companies exempt from criminal proceedings. Any criminal activity conducted as part of the company rarely leads to prosecution of the people in the company, and companies themselves aren’t really ever prosecuted for criminal acts. So any penalty to HSBC wouldn’t be criminal but civil and financial.

2) The articles say that HSBC laundered billions. This likely means it was $3-4Bn at most, but let’s assume it was $19Bn (because if it was $20Bn they would have said tens of billions). These transactions were probably earning HSBC a few basis points. I can’t say for sure since I’m not aware of the market price of criminal transactions, but I suspect the premium was not much higher than a regular transaction for the simple reason that it would make the transaction appear obviously criminal. But let’s say it was 200bp (so 2%, and that’s likely an order of magnitude higher, but for arguments sake). Then HSBC probably made about $400mm - costs (remember, assuming a very high $19bn in transactions). So a $1.9Bn fine is extremely high, being 5x HSBC’s revenue from the transactions assuming very favorable numbers, and not considering the non monetary penalties, such as probation, etc.

3) Finally, if Apple is found guilty of illegally promoting a monopoly through their App Store policies, would a fine of $7Bn be considered laughable, considering it’s about 5 weeks of Apple’s income? And in Apple’s case, the company operates fairly cohesively, and the App Store almost exists for the sole purpose of encouraging hardware sales, so there’s actually an argument to be made to base the penalty on Apple’s total income as a company. OTOH, banks tend to have fairly independent divisions, because they are highly regulated, unlike the likes of Apple, and there are all sorts of restrictions preventing the divisions that are making the kind of transactions from even interacting with most of the rest of the company. Apple collaborated more with its competitors to illegally suppress employee pay than this division of HSBC likely collaborated with any other division in HSBC (and they likely had to actively evade scrutiny from the middle office).

I’m not trying to argue that the punishment was appropriate. However, what I am arguing is that if a non banking company was found to have done something similar, they would have faced punishments that were a much tinier fraction of what HSBC faced. And that’s even before we factor in the fact that banks are orders of magnitude more regulated than nearly any other industry, with them being required to set up entire departments that account for over 10-20% of their workforce purely to ensure they can meet government regulations. Something pretty much no other industry, especially the tech industry, has to do.

Any shortcomings in the punishment imposed on HSBC was a result of leeway’s given to companies in general.