There's a similar-ish article here:
http://www.nytimes.com/2013/01/03/opinion/how-bankers-help-drug-traffickers-and-terrorists.html?_r=0It's written by a guy who was a long time AML cop.
Fun though it is to bash banks (or any large corporation), I think it's important to see the story from both sides. Especially if you plan to use these sorts of cases in arguments about AML. We haven't heard much from HSBC or other banks during such episodes, I suppose because they don't want to antagonize the government any further. So let me play devils advocate and lay out what kind of arguments they might make, if they had free reign to do so.
Fundamentally, the charge of money laundering is that the bank allowed criminals to do business with them. Why would a bank do this? One explanation is because it was profitable - but it's profitable for the bank, much less so for the individuals concerned, usually, yet the jail sentences that can go with it definitely apply to the individuals. Actually the most common and simplest explanation is because they didn't realize what was happening. This is touched on in the NY Times article:
The largest and most sophisticated of these criminal enterprises don’t trick banks into laundering their money — they partner with that small segment of the international banking and business community that recirculates drug profits and cash from other illicit trades, like black-market arms dealing ..... Bank officers at HSBC branches in Mexico who facilitated the transfer of $881 million for the Sinaloa Cartel in Mexico, the Norte del Valle Cartel in Colombia and other narcotics traffickers — deposits that were often passed through teller windows in cash-filled boxes, some with hundreds of thousands of dollars in them — might contend that they were naïve about this money’s source. But there’s little incentive for them, or any bank officer, to be more vigilant when turning a blind eye comes with little or no penalty.
The articles author of course has an unusual perspective - he worked undercover to put leaders of drug cartels behind bars, as he put it, so he's going to be very pro AML. The idea that there's "no penalty" is especially absurd given the enormous jail sentences that can accompany money laundering convictions. Even then, in this quote we can see the seeds of the problem. The largest and most sophisticated operations don't trick banks. Therefore, the rest of them do. Bank officers, he says, "might contend they were naïve to the moneys source" - in other words, they WILL contend that they didn't know where the money came from. The language is extremely biased, but here is the root of the banks defense. They didn't know.
If you read the articles about the HSBC deal, you could be forgiven for thinking that men in dark shades with baseball bats turned up to deposit boxes of cash labelled "drug money". This is almost certainly not what happened. Whilst they may have turned up with lots of cash, the men probably had apparently legitimate reasons for doing so (eg, owning a network of bars/restaurants). Now maybe some bank teller or officer might suspect there's something odd going on, maybe the volumes don't line up with what you'd expect. But where do you draw the line between banker and private detective? The law is written such that they are supposed to try and avoid being easily duped, but how much is done to avoid that is a vague gray area.
And the motive to shirk is not only financial - these are Mexican drug cartels we're talking about. If you're a low level bank officer in Mexico City and suspect that the money claimed to be coming from bars is actually drug money, are you going to go all vigilate on their ass? Hell no. These are people who kill anyone who gets in their way, but not before killing or torturing their friends and family. Even the Mexican army has failed to seriously wipe out the cartels, so what chance does a humble bank teller have? I think it's easy for politicians in Washington to lecture bank CEOs about the importance of money laundering, but if they suddenly swapped places with the guys on the front line down in Mexico, they'd start to feel a bit different.
This difficulty of motivating and training front-line staff to be private detectives is a repeated complaint from AML regulated companies. Especially because the liability for missed money laundering doesn't fall on the people who missed it. It tends to fall on high level executives who are a million miles away from the actual money flows.
The idea that you can fight crime by turning the banking sector into a shadow police force is an attractive one, but the evidence for its success is questionable. The price of street drugs has steadily
fallen over the last decades, even accounting for changes in purity and inflation. That's true despite that the amount of AML regulation and severity of the punishments has been constantly increased.
