For each story of a terrorist plot being foiled and illicit money being seized by regulators, there are hundreds of cases of the government turning its weapons of mass destruction of everyday citizens in a cash grab. Individuals are persecuted to instill fear in the general population and force mass cooperation with tax and reporting laws…imprison 1 to get 100 to pay up.
For the big banks, it works differently. They are given the option to pay-up to prevent their employees from being locked up in America. The most recent case was Standard Chartered PLC who coughed up $340 million to U.S. regulators over money-laundering allegations in September of 2012.
Why would they pay? The United States has the ability to pull their banking license in the land of the free, imprison their employees, and take away their ability to process transactions in U.S. dollars. On the day Standard Chartered reached this agreement, their stock price increased 5.4% on the Hong Kong stock exchange. Just like a traditional bank robbery, it is safer for everyone involved to pay the guy with the gun rather than fight.
U.S. regulators have netted almost $3 billion from these big bank money laundering settlements since 2009. Here are the highlights of America’s best holdups.
The largest money-laundering settlement on record is the $619 million paid by ING Bank NV in June of 2012. This Dutch bank agreed to the settlement after being accused of improperly documenting the source of funds in violation of U.S. sanctions against Cuba and Iran. The transfers were handled by Netherlands Caribbean Bank, which was a subsidiary of ING Bank NV.
The U.K. bank Lloyds TSB Group PLC reached an agreement with the Manhattan district attorney’s office and the U.S. Department of Justice in January 2009 to pay $350 million in fines and forfeiture for allowing Iranian and Sudanese clients’ access to the U.S. banking system. Again, the bank did not properly document and investigate the source of funds in various transactions. Not to be outdone, The U.S. Treasury piled on with fines of $217 million in December of that year, bringing the total take up to $567 million…not a bad day at the office…promotions all around!
2009 was a banner year for the U.S. Also in December of that year, regulators fined Credit Suisse Group $536 million, ending a five-year investigation in which the U.S. said the Swiss bank helped clients in Iran, Libya, Sudan, Myanmar and Cuba conduct financial transactions in secret.
After the agreement was reached, U.S. Attorney General Eric Holder said the following: “In both its scope and its complexity, the criminal conduct perpetrated by Credit Suisse in this case is simply astounding.” O.K., it was horrible criminal misconduct…but there were no indictments, no charges brought, and no one “brought to justice.” I guess astounding criminal conduct is a civil matter if you have enough cash on hand.
Back in April of 2007, The Dutch bank ABN AMRO Holding NV/Royal Bank of Scotland Group PLC agreed to pay $500 million to regulators for allowing transfers to be processed through New York that eventually reached Libya and Iran. The settlement was forced on the bank while it was in the process of being acquired. Had they fought the allegations, a sale / takeover would have been impossible.
Barclays Bank PLC has been in the news quite a bit this year. A probe into its involvement in manipulating LIBOR rates is likely to be the next cash cow to the American Department of Justice. To date, the bank has paid $452 million to the U.K. Financial Services Authority and the U.S.’s Commodity Futures Trading Commission and Department of Justice Fraud Section. Experts believe this is a drop in the bucket compared to what is coming.
Barclays is no stranger to paying off regulators. In August 2010, Barclays agreed to pay $298 million to settle charges by U.S. and New York prosecutors relating to client payments from Cuba, Sudan and other places under U.S. sanctions.
Stay tuned…the largest paydays are still to come! For example, HSBC Holdings PLC said it has set aside $700 million to cover potential fines following U.S. allegations that some of HSBC’s global operations were used by money-launderers and potential terrorist financiers.
Anti-money laundering is big business and a great source of revenue for cash strapped America. You can expect these cases to increase tenfold in the coming years.