[rayiner]

The relevant text is: "17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk."

It's very misleading to leave out the "unless the customers were otherwise classified as high risk." That smacks of someone not understanding how to properly implement the compliance function.

The rest of the statement of facts reads like a classic case of a company cheating out on the compliance function (like every company tries to do) and failing to adequately monitor a foreign subsidiary.

I think the fine was too small, but the facts are consistent with negligence warranting a fine, not intentional criminal conduct that might warrant jail time.

[milkshakes]

No, I believe the text directly that follows the paragraph you quoted is more relevant, and I am Not a Lawyer, but the facts outlined do not appear to be consistent with mere negligence, at least any definition of negligence that I'm familiar with.

18. Between 2000 and 2009, HSBC Bank USA, and its executives and officers, were aware of numerous publicly available and industry-wide advisories about the money laundering risks inherent to Mexican financial institutions.

19. Despite this evidence of the serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as standard risk, its lowest AML risk category. As a result, wire transfers originating from Mexico, including transactions from HSBC Mexico, were generally not reviewed in the CAMP system. From 2006 until May 2009, when HSBC Bank USA raised Mexico’s risk rating to high, over 316,000 transactions worth over $670 billion from HSBC Mexico alone were excluded from monitoring in the CAMP system.

Furthermore, the remaining 80% of the document goes on to outline a pervasive and long-running pattern of behavior consistent with willful subversion of both the letter and the spirit of AML.

I find it disappointing if not unsurprising that HSBC can continue to operate as usual after openly flaunting at staggering scale the very policies that Mt Gox is being effectively shut down for potentially falling afoul of.

[rayiner]

Translation: other people thought Mexico was a high risk area from 2000 to 2009, but HSBC rated it "Standard Risk" from 2006 to 2009.

What about this strikes you as intentionally criminal activity?

[milkshakes]

Are we reading the same statement?

How about this part?

>Without adequate KYC information, HSBC Mexico knew very little about who these high risk customers were or why they had such large amounts of U.S. dollars. However, even without the benefit of adequate KYC information, the risks were obvious. Indeed, one HSBC Mexico compliance officer noted “the massive misuse of [the HSBC Mexico Cayman Islands U.S. dollar accounts] by organized crime.” One example, identified by HSBC Group’s Head of Compliance in July 2008, involved “significant USD remittances being made by a number of [HSBC Mexico’s Cayman Islands U.S. dollar] customers to a US company alleged to be involved in the supply of aircraft to drug cartels.”

Or this?

>When suspicious activity was identified, HSBC Mexico repeatedly failed to take action to close the accounts. Senior business executives at HSBC Mexico repeatedly overruled recommendations from its own AML committee to close accounts with documented suspicious activity.

Or the part where HSBC Mexico was laundering so much money that both the Mexican Central Bank and the Mexican Financial Intelligence Division both complained to them within 6 months of each other?

>In November 2007, Banco de Mexico, the central bank of Mexico, expressed concerns about the volume of U.S. dollars exported by HSBC Mexico back to the United States. Specifically, Banco de Mexico wanted an explanation as to why HSBC Mexico’s U.S. dollar exports were significantly larger than its market share would suggest.

In February 2008, HSBC Mexico’s CEO met with the head of the CNBV and the head of Mexico’s financial intelligence unit, Unidad de Inteligencia Financiera (“UIF”). Again, the volume of HSBC Mexico’s U.S. dollar exports was raised as a concern. Specifically, HSBC Mexico’s CEO was told that law enforcement in Mexico and the United States were seriously concerned that the U.S. dollars being deposited at HSBC Mexico might represent drug trafficking proceeds. HSBC Mexico’s CEO was also told that Mexican law enforcement possessed a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money.

Or my personal favorite, where the cartels designed special boxes to maximize the rate at which they could shove their dirty money through the teller windows:

>In order to efficiently move this volume of cash through the teller windows at HSBC Mexico branches, drug traffickers designed specially shaped boxes that fit the precise dimensions of the teller windows. The drug traffickers would send numerous boxes filled with cash through the teller windows for deposit into HSBC Mexico accounts.

And before you tell me that this was limited to HSBC Mexico:

>Senior HSBC Group executives, including the CEO, Head of Compliance, Head of Audit, and Head of Legal, were all aware that the problems at HSBC Mexico involved U.S. dollars and U.S. dollar accounts.

[trevelyan]

Huh? Why do you think it is appropriate for the US government to be regulating the behavior of a foreign bank in a foreign country? I have a business account at HSBC in Hong Kong. It stores assets in USD and it is none of your or your government's business. I had assumed the US bank somehow violated American law, because if the only complaints are about the behavior of the Mexican bank, the whole thing smells like a political shakedown.

By your logic the Chinese government should be fining American banks (i.e. Citibank) which offer RMB<-->USD conversion services outside China. Because, after all, the RMB is a controlled currency in China and the behavior of American banks is illegal under Chinese law.

[milkshakes]

> Huh? Why do you think it is appropriate for the US government to be regulating the behavior of a foreign bank in a foreign country?

That's quite the straw man you've set up. I don't believe I ever once said anything like that.

I do think it is appropriate for the US to regulate the operations of a foreign bank within their boarders. If the multinational bank violated US law, the multinational bank and its US subsidiaries should lose their ability to continue to conduct business in the US. You know, like what DHS is doing to Mt Gox now, which was the whole point of this thread in the first place.

[trevelyan]

> That's quite the straw man you've set up. I don't believe I ever once said anything like that.

Huh? Your post goes on and on accusing HSBC Mexico of malfeasance yet does not contain a single accusation of wrongdoing on the part of any American subsidiary or company.

As far the MtGox issue goes, DHS has shut down an American account belonging to an American company (a subsidiary explicitly created in the US to process USD). It is an entirely different matter.

[DanBC]

There are international agreements about money laundering.

[trevelyan]

There are international agreements about a lot of things. Doesn't make American law apply to non-American companies.

[thwest]

We could use a political shakedown or two for the Mexican cartels.

[aspensmonster]

The whole point of white collar crime is that it is difficult to distinguish from negligence. And when the standard for prosecution essentially requires that the defense acts like a comic book villain --or at least plainly writes down their intent, rather than masking it-- it really isn't a surprise that the courts are unable to convict over criminal charges. That other people thought (rightfully) that Mexico was a high risk area, while HSBC classified it under their lowest risk tier, smacks of intentional "negligence." So they pay a civil fine --that wasn't nearly big enough-- and the take-home message stays the same: just play dumb if you're ever caught and all will be fine.

[milkshakes]

I completely agree, but in this case it doesn't seem to be a question of being able to prove that they were guilty.

The DOJ-HSBC joint statement acknowledges that, among other offenses, "From the mid-1990s through at least September 2006, HSBC Group Affiliates violated both U.S. and New York State criminal laws by knowingly and willfully moving or permitting to be moved illegally hundreds of millions of dollars through the U.S. financial system on behalf of banks located in Cuba, Iran, Libya, Sudan, and Burma, ... in violation of U.S. economic sanctions."

The statement then goes on for several pages to outline in detail how they demonstrably knowingly broke the law, including this gem:

"HSBC Group was aware of this practice as early as 2000. In 2003, HSBC Group’s Head of Compliance acknowledged that amending payment messages “could provide the basis for an action against [HSBC] Group for breach of sanctions.” At that time, HSBC Group Compliance instructed HSBC Europe to stop the practice. However, HSBC Europe appealed, and due to the “significant business opportunities” offered by the Sanctioned Entities, HSBC Group’s Head of Compliance granted HSBC Europe an extension to continue processing payments in the same manner."

[rayiner]

> The whole point of white collar crime is that it is difficult to distinguish from negligence. And when the standard for prosecution essentially requires that the defense acts like a comic book villain --or at least plainly writes down their intent, rather than masking it-- it really isn't a surprise that the courts are unable to convict over criminal charges.

This analysis is spot-on. White collar crime is difficult to prosecute because people fuck up all the time and it's hard to distinguish between a run of the mill fuck up and malicious intent, especially because our usual go-to for inferring intent ("motive") is hard to rely on because in the context of billions of dollars flying around, there always seems like there was motive.

Hence the fine, though we're in agreement that it should be bigger, in order to make it more justifiable to spend resources on exercising more care.

[coldtea]

Besides all the other facts in the statement, how about this, vastly improved translation:

"dialing down Mexico, one of the top and well known high risk areas for drug money, into merely Standard Risk"?

You make their on purpose decision to benefit from looser checks sound as some kind of ...unfortunate miscalculation on their behalf of the risk of Mexican money.

[coldtea]

>The relevant text is: "17. From 2006 to 2009, HSBC Bank USA knowingly set the thresholds in CAMP so that wire transfers by customers located in countries categorized as standard or medium risk, including foreign financial institutions with correspondent accounts, would not be subject to automated monitoring unless the customers were otherwise classified as high risk."

It's very misleading to leave out the "unless the customers were otherwise classified as high risk." That smacks of someone not understanding how to properly implement the compliance function.

I don't see anything misleading. It clearly shows this was no negligence.

They purposefully complied only for the coarser and more dangerous cases ("customers classified as high risk") and stood to benefit for letting all the others go through.