Once Again Jamie Dimon Gets Special Treatment

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Yesterday, the Office of the Comptroller of the Currency issued two orders to JP Morgan Chase, one related to its London Fail Whale, the other related to failures in its Bank Secrecy Act/Anti-Money Laundering compliance. With respect to latter order, OCC said, in part:

(1) The OCC’s examination findings establish that the Bank has deficiencies in its BSA/AML compliance program. These deficiencies have resulted in the failure to correct a previously reported problem and a BSA/AML compliance program violation under 12 U.S.C. § 1818(s) and its implementing regulation, 12 C.F.R. § 21.21 (BSA Compliance Program). In addition, the Bank has violated 12 C.F.R. § 21.11 (Suspicious Activity Report Filings).

(2) The Bank has failed to adopt and implement a compliance program that adequately covers the required BSA/AML program elements due to an inadequate system of internal controls, and ineffective independent testing. The Bank did not develop adequate due diligence on customers, particularly in the Commercial and Business Banking Unit, a repeat problem, and failed to file all necessary Suspicious Activity Reports (“SARs”) related to suspicious customer activity.

(3) The Bank failed to correct previously identified systemic weaknesses in the adequacy of customer due diligence and the effectiveness of monitoring in light of the customers’ cash activity and business type, constituting a deficiency in its BSA/AML compliance program and resulting in a violation of 12 U.S.C. § 1818(s)(3)(B).

That last one is the real peach. You see, in spite of the fact the order includes 22 pages of things JPMC “shall” do to fix this problem, the order did not include any fine. Remember, it has been less than 18 months since JPMC got caught–among other things–sending a ton of gold bullion to Iran in violation of sanctions. That time, at least, Treasury’s Office of Foreign Asset Controls fined JPMC, if only $88.3 million.

Still, here were are a year and a half later, with JPMC still refusing to police what it is helping its customers do, and the government is letting JPMC off with no fine.

Compare that to the treatment of Karen Gasparian, the manager of the G&A Check Cashing company out in LA. Today, he got sentenced to five years in prison for doing precisely what Jamie Dimon did: fail to comply with BSA/AML law. In his sentencing, he even submitted record of all the big banks that have skated for doing what he did, including HSBC’s 1.9 Billion wrist slap, and noted the disparity in treatment.

An even greater problem with the Government’s seeking a sentence of incarceration in this case is the disparity when compared to other instances of the same offense, or instances involving even more egregious conduct, such as much larger financial institutions conducting business with drug trafficking organizations and terroristic regimes like Iran. Time and time again, the United States Government has offered deferred prosecution agreements (and fines) to financial institutions whose conduct was exponentially more egregious than the conduct at issue here. Mr. Gasparian’s offense, while serious, was still far short of the conduct committed by these other institutions. Any sentence of incarceration in this case would be a loud proclamation that the rich and powerful receive one type of justice, while those less powerful receive another type.

The government, of course, insisted on enhancements to Gasparian’s sentence because his crime amounted to over $100,000 in a one year period (the government sent two confidential witnesses to cash checks at G&A, which is how they proved that amount).

Remember HSBC provided over $990 million in cash to a terrorist bank over a four year period. All that’s before you consider their money laundering for Mexican cartels and probable Russian mafia. Not a single HSBC employee was so much as indicted, much less sent to jail for five years or for a lifetime for material support for terrorism.

And now JPMC–and its “manager,” Jamie Dimon–not only get off without indictments, but without even a fine (at least not from OCC–OFAC may end up fining them).

The government submitted a bunch of sealed documents explaining why Gasparian should be treated so much more harshly than the big banks. I’m just going to assume the government explained what great intelligence work the big banks are doing to avoid being subjected to the rule of law.

Predictably, Lanny Breuer waved his dick around boasted about this conviction.

“Karen Gasparian, Humberto Sanchez and their company G&A Check Cashing purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A to commit illegal activity,” said Assistant Attorney General Breuer.  “They knew they were required to report transactions over $10,000, but deliberately failed to do so.  As this case shows, check cashing businesses must adhere to our anti-money laundering rules, or else pay the consequences.”

This is the guy who, just one month ago, failed to even mention he was letting a bank that sent hundreds of millions in cash to a terrorist bank off without any charges.

At this point, it’s beginning to look like DOJ’s disparate treatment is not just about preserving his buddies the CEOs. But it’s about eliminating the little competitors like G&A so the equally corrupt big banks can take over their markets.

Update: Adding this from the government’s sentencing motion. The government insisted that Gasparian do time … as a deterrent.

Because there are hundreds of check cashers in Los Angeles as well as an underlying health care fraud problem, it is more important that the sentence here be sufficient to promote respect for the law and general deterrence for the types of criminal activities defendant engaged in as well as the health care fraudsters. A significant sentence is also necessary to reflect the serious [sic] of the offense, deter criminal conduct, and protect the public from defendant.

After Having Let Off HSBC with an Inadequate Fine, Regulators Prepare to Let JPMC Off with No Fine

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It has been less than 18 months since JP Morgan Chase was fined $88.3 million for–among other things–sending a ton of gold bullion to Iran.

Yet JPMC’s regulators are about to scold JPMC–and demand it improve the compliance programs it promised to improve 18 months ago–again.

Only, having found JPMC didn’t implement the promised compliance programs after being fined, JPMC’s regulators this time will not fine the bank for violating US law.

A U.S. regulatory probe of JP Morgan Chase & Co is expected to result in an order that the bank correct lapses in how it polices suspect money flows, in an action expected as soon as Friday, people familiar with the situation said.

The action would be in the form of a cease-and-desist order, whichregulators use to force banks to improve compliance weaknesses, the sources said.

The order is expected to be issued by the Office of the Comptroller of the Currency and the Federal Reserve.

JP Morgan is not expected to pay a monetary penalty, according to one person familiar with the situation.

This is what counts as seriousness from US bank regulators–ever quieting peeps when American banks openly flout the law (they’re a bit harsher with European banks, though still believe in forgiving such banks for things like material support to terrorism).

A teenager busted for shoplifting would pay more in fines than JPMC reportedly will pay for helping crooks–even alleged assassins–do their crime.

 

Lanny Breuer Deputizes Banks Rather than Prosecuting Them

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Back when DOJ’s head of criminal prosecutions, Lanny Breuer, let HSBC off without indictments, I noted that he didn’t even mention HSBC’s significant ties to funding terrorists.

When it came to one of the world’s biggest banks, the Assistant Attorney General chose to simply ignore the threat DOJ’s been singularly dedicated to defeating since 9/11, terrorism.

But the Statement of Facts on the HSBC settlement wasn’t quite as reticent as Breuer himself. It said this about HSBC’s ties to terrorist financing:

In addition to the cooperative steps listed above, HSBC Bank USA has assisted the Government in investigations of certain individuals suspected of money laundering and terrorist financing.

That is, the court documents on the settlement talk about HSBC helping to investigate terrorist financing, rather than HSBC playing a key role in making up to a billion dollars available for terrorist financing. DOJ turned HSBC’s complicity in the central threat of our time into purported assistance pursuing it.

Poof! DOJ turned a criminal bank into a law enforcement partner, all through the secret exercise of so-called prosecutorial discretion.

Which is important background for the story about DOJ with which NPR’s Carrie Johnson has begun the year, describing how Lanny Breuer is asking banks–the same banks who crashed the economy with a bunch of criminal scams that have gone unpunished–to serve as “quasi cops.”

Every year, banks handle tens of millions of transactions. Some of them involve drug money, or deals with companies doing secret business with countries like Iran and Syria, in defiance of trade sanctions.

But if the Justice Department has its way, banks will be forced to change — to spot illegal transactions and blow the whistle before any money changes hands.

[snip]

But [former OCC head Eugene] Ludwig, who now consults for banks at the Promontory Financial Group [which makes huge money not finding crimes for the banks], says prosecutors and bank regulators can’t catch all the fraud, so they’re depending on the banks themselves to do a better job.

“Banks are not set up historically really to be kind of quasi law enforcement enterprises, which is really what the U.S. government’s asking of them,” he says.

Every time a financial institution makes a fix, criminals try to work around it. Ludwig calls it a cat-and-mouse game. “Fair or not, it’s what the government is demanding of our enterprises, and everybody has to face up to that reality, I think,” he says.

Ludwig may be publicly complaining. But his firm has already gotten consulting fees to hide the scale of Standard Chartered Bank’s fraud, and the government is about to give up on the badly-conflicted foreclosure abuse review for which Promontory consulted with Bank of American and Wells Fargo. It seems clear that Promontory will get rich whitewashing bank crimes so Lanny Breuer can pretend banks are cops, not robbers.

But that’s not the most lucrative scam here. After all, HSBC was able to reap billions because it served a key role in providing cash that went, in part, to terrorists. And yet it, unlike Muslim men, seems guaranteed under Lanny Breuer to wipe that slate clean by flipping on their former clients at a convenient time (and given that DOJ has taken no action against Al Rajhi bank, in only a limited fashion).

All this remains unstated. In fact, I guarantee you if it were ever asked, DOJ would refuse to divulge precisely what kind of quasi cop HSBC is playing, as it could under a law enforcement exception to FOIAs. Even Carl Levin’s otherwise meticulous report on HSBC was silent about what happened when Treasury’s former Under Secretary for Terrorist Finance went to HSBC.

But as part of the scam, it appears both a criminal bank and our buddies the Saudis have avoided any punishment for funding terrorism.

Which is how it works when the crooks get deputized rather than prosecuted.

 

 

Barney Frank: “As Well as To Financial Regulators”

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When I first read about this letter from retiring Financial Services Committee Ranking Member Barney Frank to Eric Holder, I thought it akin to what retiring Homeland Security Chair Joe Lieberman did on the Sunday shows when he aggressively called for gun control: a PR stunt by an outgoing top Committee member, addressing a problem in all-but retirement that he didn’t address while he had the authority to do so in Congress.

Dear Mr. Attorney General:

I note several instances recently in which Administration officials have proceeded civilly against blatant violations of our important financial laws, in part because of the difficulty of proving cases beyond a reasonable doubt, especially where the law may have been somewhat uncertain, but also because of a concern that the criminal conviction—and even indictment—of a major financial institution could have a destabilizing effect. This latter consideration does not apply, similarly, to individuals. It is, of course, the case that no corporation can have engaged in wrongdoing without the active decision of individual officers of that entity. I believe it is also the case that prosecuting individuals has more of a deterrent effect than prosecuting corporations.

I am writing to you as well as to financial regulators, understanding that the decision to pursue criminal proceedings rests with the Justice Department, so I ask that there be a series of consultations involving law enforcement officials and regulators with the goal of increasing prosecution of culpable individuals as an important step in seeing that the laws that protect the stability and integrity of our financial system are better observed.

BARNEY FRANK

And that may well be what this is: an effort to pile on all the calls for prosecuting the banksters.

But I am fascinated by that second paragraph, the mention of the financial regulators. Consider this NYT account of HSBC’s wrist-slap that Bill Black highlighted.

Despite the Justice Department’s proposed compromise, Treasury Department officials and bank regulators at the Federal Reserve and the Office of the Comptroller of the Currency pointed to potential issues with the aggressive stance, according to the officials briefed on the matter. When approached by the Justice Department for their thoughts, the regulators cautioned about the effect on the broader economy.

“The Justice Department asked Treasury for our view about the potential implications of prosecuting a large financial institution,” David S. Cohen, the Treasury’s under secretary for terrorism and financial intelligence, said in a statement. “We did not believe we were in a position to offer any meaningful assessment. The decision of how the Justice Department exercises its prosecutorial discretion is solely theirs and Treasury had no role.”

Still, some prosecutors proposed that Attorney General Eric H. Holder Jr. meet with Treasury Secretary Timothy F. Geithner, people briefed on the matter said. The meeting never took place. [my emphasis]

DOJ went to Treasury and the Fed and OCC and asked for permission to get HSBC to plead guilty to Bank Secrecy Act violations. According to Cohen, Treasury said they had no meaningful assessment. According to NYT, the regulators–the Fed and OCC–raised concerns about the broader economy.

And Barney Frank says he is writing financial regulators (in addition to Holder himself) about bank immunity, but this appears not to be the letter to financial regulators, because they are not CC’ed on the letter. Yet he has not released a separate letter to regulators to the press (though if my attempts to get this letter this morning are any indication, Frank’s staffers have already moved onto look for new jobs).

This suggests there’s another letter to the people who told DOJ to let HSBC skate.

It’s worth noting that one of these regulators–OCC–was broadly implicated by the Permanent Subcommittee Investigation of HSBC.

In any case, there seems to be more to what Frank is doing. It may be he’s just trying to push Holder to meet with TurboTax Timmeh and the financial regulators, as Holder’s prosecutors attempted to make happen. Or he may be doing something else here, potentially even coaxing regulators to embrace individual indictments to stave off the larger anger about the HSBC wrist-slap.

It may well be this is a show. But it appears that we’re only seeing half the show.

Government Teat-Sucking Bankster, Steven Rattner, Calls Auto Bailout “Un-American”

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I’m sure someone thought it was a good idea to trot out Steven Rattner to spin the government’s announced plan to sell its GM stake.

But I don’t know how anyone thought a bankster–and particularly this bankster–could say this and still wield any credibility.

From Washington’s point of view, divesting its remaining shares will end an uncomfortable and distinctly un-American period of government ownership in a major industrial company.

Sure. Rattner places this sentiment in “Washington’s point of view.” Still, consider the messenger.

After all, he barely mentions here–as he did in his book–that this was not just a bailout of some industrial companies. It was also a bailout of two finance companies, Chrysler Finance and GMAC (he mentions that the government still owns Ally/GMAC, but still calls the scorecard, “nearly complete”). As such, it was also the bailout of the Private Equity firm, Cerberus, that had spent the previous years stripping Chrysler in the hopes of retaining just the finance arms.

He also neglects to mention that the government still pursues the un-American policy of treating banks according to a different set of rules, not only providing them free money, but seemingly exempting them from all laws.

Finally, he shows no self-awareness of his own history, including paying kickbacks so his firm could make big money off of New York State (for which he, like all banksters, got a mere wrist-slap).

I’m not saying the government should hold onto its GM stake forever (though unlike Rattner, executive compensation is the last reason I’d cite to applaud this sale). But having someone like Rattner call government intervention in purportedly capitalist companies un-American only perpetuates the idea that industrial companies should have to abide by so-called rules of capitalism that the titans of capitalism, the banksters, have all but discarded.

Democratic and Republican Agreement: Prosecute HSBC

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Apparently, Matt Taibbi and Glenn Greenwald and Matt Stoller and Howie Klein and I aren’t the only hippies who believe HSBC should be treated like any other legal person who helped drug gangs and terrorists launder money.

Both Chuck Grassley and Jeff Merkley have written Eric Holder letters complaining about this treatment.

Here’s Grassley (who, as he notes elsewhere in the letter, is the Ranking Member on the Senate Judiciary Committee and has demanded a briefing):

I write today to express my continuing disappointment with the enforcement policies of the Department of Justice (Department). On December 12, 2012, the Department entered into a Deferred Prosecution Agreement (DPA) with HSBC, a global bank that has now admitted to violating federal laws designed to prevent drug lords and terrorists from laundering money in the United States. While the Department has publicly congratulated itself for this settlement, the truth is that the Department has refused to prosecute any individual employees or the bank responsible for these crimes. This troubling lack of real enforcement will have consequences for the health of our economy and the safety and prosperity of the American people.

[snip]

In spite of this egregious criminal conduct, the DPA fails in finding the proper punishment for the bank or its employees.  Under its terms, the DPA obligates HSBC to pay $1.92 billion to the federal government, improve its internal AML controls, and submit to the oversight of an outside monitor for five years.   Despite the fact that this is a “record” settlement,  for a bank as gigantic as HSBC this is hardly even a slap on the wrist.  It only amounts to between 9 and 11% of HBSC’s profits last year alone,  and is a bare fraction of the sums left unmonitored.

[snip]

Even more concerning is the fact that the individuals responsible for these failures are not being held accountable.  The Department has not prosecuted a single employee of HSBC—no executives, no directors, no AML compliance staff members, no one.  By allowing these individuals to walk away without any real punishment, the Department is declaring that crime actually does pay.  Functionally, HSBC has quite literally purchased a get-out-of-jail-free card for its employees for the price of $1.92 billion dollars.

[snip]

Past settlements with large banks prove that they do nothing to change what appears to be a culture of noncompliance for some businesses.According to the U.S. Sentencing Commission, jail time is served by over 96 percent of persons that plead or are found guilty of drug trafficking, 80 percent of those that plead or are found guilty of money laundering, and 63 percent of those caught in possession of drugs.[6]  As the deferred prosecution agreement appears now to be the corporate equivalent of acknowledging guilt, the best way for a guilty party to avoid jail time may be to ensure that the party is or is employed by a globally significant bank  In March 2010, the Department arranged a then-record $160 million deferred prosecution agreement with Wachovia based on its laundering of more than $110 million from Colombian and Mexican drug cartels.   Officials at the time stated that “blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations.”   In this case, a bank escaped with a record monetary settlement and a conspicuous absence of individuals behind bars.  If the story sounds eerily similar, that’s because it is.  It happened again with HSBC. [my emphasis]

And here’s Merkley (who is on the Senate Banking Committee):

I do not take a position on the merits of this or any other individual case, but I am deeply concerned that four years after the financial crisis, the Department appears to have firmly set the precedent that no bank, bank employee, or bank executive can be prosecuted even for serious criminal actions if that bank is a large, systemically important financial institution. This “too big to jail” approach to law enforcement, which deeply offends the public’s sense of justice, effectively vitiates the law as written by Congress. Had Congress wished to declare that violations of money laundering, terrorist financing, fraud, and a number of other illicit financial actions would only constitute civil violations, it could have done so. It did not.

[snip]

According to the U.S. Sentencing Commission, jail time is served by over 96 percent of persons that plead or are found guilty of drug trafficking, 80 percent of those that plead or are found guilty of money laundering, and 63 percent of those caught in possession of drugs.[6] As the deferred prosecution agreement appears now to be the corporate equivalent of acknowledging guilt, the best way for a guilty party to avoid jail time may be to ensure that the party is or is employed by a globally significant bank. [my emphasis]

Note, unlike Lanny Breuer, both Senators mention terrorism (though Merkley seems unaware how serious HSBC’s ties to Islamic terrorist financing are).

More importantly, they sound like the rest of us dirty hippies, making the audacious argument that banks ought to be subject to laws.

Lanny Breuer Covers Up Material Support for Terrorism

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I noted last week how prosecutors were claiming they were being extra tough on HSBC for all its money laundering because of the seriousness of the charge they were going to defer: money laundering. Yesterday, with great fanfare, DOJ rolled out their deferred prosecution for money laundering, as if it were a good thing to ratchet up the charges you excuse.

But I was struck even more by how DOJ treated HSBC’s crimes they chose not to indict. Here’s how Assistant Attorney General Lanny Breuer described HSBC’s crimes:

HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries.

From 2006 to 2010, the Sinaloa Cartel in Mexico, the Norte del Valle Cartel in Colombia, and other drug traffickers laundered at least $881 million in illegal narcotics trafficking proceeds through HSBC Bank USA.  These traffickers didn’t have to try very hard.  They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico’s branches.

In total, HSBC Bank USA failed to monitor over $670 billion in wire transfers from HSBC Mexico between 2006 and 2009, and failed to monitor over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico over that same period.

In addition to this egregious lack of oversight, from the mid-1990s through at least September 2006, HSBC knowingly allowed hundreds of millions of dollars to move through the U.S. financial system on behalf of banks located in countries subject to U.S. sanctions, including Cuba, Iran and Sudan.  On at least one occasion, HSBC instructed a bank in Iran on how to format payment messages so that the transactions would not be blocked or rejected by the United States.

That is, Breuer says HSBC 1) helped Mexican drug cartels launder money and 2) helped Cuban, Iranian, and Sudanese banks avoid US sanctions.

But that’s not all, according to the Permanent Subcommittee on Investigations, that HSBC did. The four main sections of the PSI report on HSBC’s Bank Secrecy Act and money laundering violations pertain to:

  1. Money laundering for Mexican cartels
  2. Helping banks evade sanctions
  3. Processing masses of travelers checks from Hokoriku bank in Japan which had suspicious ties to Russian “businessmen”
  4. Maintaining correspondent accounts with banks that had ties to terrorism, most notably the Al Rajhi bank

One of the things, according to Carl Levin, that HSBC did was help banks involved in terrorist financing get US dollars (that section takes up 53 pages of a 340 page report). And yet, Breuer’s speech did not once mention the word terrorism. The US Attorney’s release used the word “terror” once, though not in conjunction with HSBC. And the Statement of Facts mentions terrorism in conjunction with a description of the laws HSBC violated and in this one paragraph.

In addition to the cooperative steps listed above, HSBC Bank USA has assisted the Government in investigations of certain individuals suspected of money laundering and terrorist financing.

In short, Lanny Breuer and his prosecutors did not mention that this bank they were letting off without prosecution provided a terrorist-connected bank with US dollars for years.

Read more →

How Treasury Justified a $13 Million Smaller SCB Settlement than NYS

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Back in August, Standard Chartered Bank settled with New York’s Superintendent of Financial Services for laundering Iran and other sanctioned countries’ money; that settlement was for $340 million.

Today, Treasury announced its settlement for the same fraud. Today’s settlement–which includes “U.S. Attorney’s Office for the District of Columbia, the Department of Justice’s National Security Division, the Department of Justice’s Asset Forfeiture and Money Laundering Section and the New York County District Attorney’s Office; as well as orders involving the Board of Governors with the cooperation of the UK’s Financial Services Authority,”–is for $327 million, of which Treasury’s take is $132 million.

When SCB settled with SFS, it admitted that its fraud had covered $250 billion in transactions (thus refuting the dubious work done by Promotory Financial).

The New York State Department of Financial Services (“DFS”) and Standard Chartered Bank (“Bank”) have reached an agreement to settle the matters raised in the DFS Order dated August 6, 2012. The parties have agreed that the conduct at issue involved transactions of at least $250 billion. [my emphasis]

But today’s Treasury settlement shrinks that claim this way:

While SCB’s omission of information affected approximately 60,000 transactions related to Iran totaling $250 billion, the vast majority of these transactions do not appear to have been violations of the Iranian Transaction Regulations, 31 C.F.R. Part 560 due to authorizations and exemptions which were in place at the time.

Treasury would have us believe that SCB engaged in fraud to hide Iran’s involvement of money transfers even with legitimate transfers.

Maybe that’s right. Without a lot more transparency, we’ll just have to take Treasury’s word for the claim that the vast majority of money Iran was transferring up to 2008 didn’t fall under sanctions in place at the time, as dubious as that is.

Now, none of this addresses the scope of the violations involving other sanctioned countries, such as the $96 million transfered to Sudan described in the Treasury settlement but not the SFS one. Nor does it address the $243,500 it transfered for a designated drug kingpin, Connect Telecom, in 2011, after SCB had already started discussing these issues with “certain law enforcement agencies” and NYS.

It also relies on this claim:

OFAC had not issued a penalty notice of Finding of Violation against SCB in the five years preceding the apparent violations.

To make SCB look compliant, even though the Fed had been in discussions with SCB about these violations starting in 2004.

And of course, it includes this language:

Without this Agreement constituting an admission or denial by SCB of any allegation made or implied by OFAC in connection with this matter…

In spite of SCB’s earlier admissions to SFS.

Again, SCB has already admitted to some of this fraud. But Treasury has gone out of its way to not only not require an admission, but to retroactively label hundreds of billions of dollars in fraudulent transactions kosher.

It’s really time to start asking why that is.

The New Measure of DOJ Seriousness: The Charges It Defers

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In an article on the upcoming HSBC settlement, Reuters seems impressed with the fine the bank may pay for the assistance it gave to drug gangs and terrorists and other crooks by  laundering their money: $1.8 billion. It goes on to talk about “how big a signal” DOJ wants to send with this settlement.

The emphasis, of course, should be on that word “settlement.” One that will likely result in a Deferred Prosecution Agreement, in which no one gets charged, not even for the egregious conduct HSBC engaged in.

Because ultimately, Reuters is measuring this big signal by the seriousness of the criminal charges DOJ doesn’t file.

In regulatory filings, HSBC has said it could face criminal charges. But similar U.S. investigations have culminated in deferred prosecution deals, where law-enforcement agencies delay or forgo prosecuting a company if it admits wrongdoing, pays a fine and agrees to clean up its compliance systems. If the company missteps again, the Justice Department could prosecute.

[snip]

The agreements “have become a mainstay of white collar criminal law enforcement,” U.S. Assistant Attorney General Lanny Breuer said in September during an appearance at the New York City Bar Association.

“I’ve heard people criticize them and I’ve heard people praise them. DPAs have had a truly transformative effect on particular companies and, more generally, on corporate culture across the globe.”

If U.S. prosecutors agree to a deferred agreement, they still could wield a powerful legal tool by accusing the bank of laundering money.

That would be a much more serious charge than if prosecutors, in a deferred agreement, charged HSBC with criminal violations of the Bank Secrecy Act, a law that requires banks to maintain programs that root out suspicious transactions.

[snip]

A charge of money laundering would be a rare move by the Justice Department and would send a signal to other big banks that the agency is intent on cracking down on dirty money moving through the U.S. financial system. [my emphasis]

No, seriously. A legitimate report just said that DOJ will send “a signal” based on ratcheting up the seriousness of the crimes it makes disappear with one of Lanny Breuer’s flaccid DPAs. It will send “a signal” with the seriousness of the charges it will effectively excuse.

Heck. If we’re not going to really charge these banksters, why not add on murder or drug trafficking or terrorism charges, or any of the other crimes they abetted? That would really send “a signal” now, wouldn’t it, deferring even more serious charges that real people would do hard time for?

The Senate has already accused HSBC of money laundering. But mere accusations–even with promises to do better–do nothing.

No matter how serious a charge those accusations involve excusing.

The War on Drugs Other Countries’ Ruthless Vicious Capitalists

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This long Benjamin Wallace-Wells piece on the lost war on drugs is worth reading in any case. But I’d like to pose his description of the fizzling war between drug gangs against the US response to such fizzling violence.

First, Wallace-Wells offers a description of the truce between two Salvadoran gangs earlier this year.

Early this year, a former Salvadorean guerrilla fighter named Raul Mijango began meeting secretly with the leaders of the nation’s two largest gangs, Mara Salvatrucha 13 and Barrio 18, in prison, in an effort to negotiate a form of truce. The Salvadorean street gangs (each of which was founded in Los Angeles) are not major international movers of drugs, but they are known for an almost tribal violence, and in recent years, the conflicts between the two groups has threatened to overrun the state.

Mijango would not say who authorized his mission, though it was widely assumed that the government had sent him. The gang leaders in prison did not consult their allies in Los Angeles. But Mijango, a former guerrilla fighter, knew what exhaustion looked like. “I sensed from the beginning that they felt that maybe this was the opportunity they were looking for,” he says. In February, he asked the leaders to meet in the same room in a prison that had been set aside for that purpose, and though “the idea did not please them,” Mijango says, he felt some trust had been brokered when they saw one another face-to-face. Soon he had the framework of an agreement—in which the gangs would call off their feud with one another, would stop recruiting children. In return, the leaders wanted to be sent to other, more congenial prisons, where they could be closer to their families. That was all right with the authorities, and so, in May, the leaders were transferred.

The truce was not formally announced. The way that it reached the outside world was that the killing simply stopped.

This truce is just one of the reasons I’m so puzzled by Treasury’s decision to list MS-13 as a Transnational Criminal Organization earlier this year is so puzzling. Just after the US has made a slew of MS-13 arrests and MS-13 in El Salvador has backed off the killing, the US has decided to wield terrorist-like legal means against it.

As if we had to invent a reason to keep them illegal.

Then there’s Wallace-Wells’ explanation why–in spite of US based examples where you can target violence while leaving the drug sales intact–some top diplomats believe you can’t end the war on “drugs.”

Another reason legalization may not do much to diminish the violence is that some of the largest Mexican cartels, as they have moved more deeply into extortion and kidnapping, may be evolving out of the reach of drug policy. The problem is that some of the largest Mexican groups have moved deeper into extortion and kidnapping and have become less dependent on narcotics. “My fear is that if you legalize drugs tomorrow, I don’t think you’re going to reduce the number of cartels or the amount of homicide or the flow of illicit goods,” says Adam Blackwell, a Canadian diplomat who is the secretary for multi­dimensional security at the Organization for American States. “Focusing too much on drugs takes us away from the real issues, which are”—he searches for the right word. “Structures. Cartel structures. Gang structures.”

Blackwell’s formulation almost exactly parallels what Hillary said yesterday about the drug war.

“I respect those in the region who believe strongly that [U.S. legalization] would end the problem,” Clinton said Thursday at a Washington D.C. forum hosted by Foreign Policy magazine. “I am not convinced of that, speaking personally.”

[snip]

“I think when you’ve got ruthless vicious people who have made money one way and it’s somehow blocked, they’ll figure out another way,” she said. “They’ll do kidnapping they’ll do extortion.”

But both Blackwell and Hillary suffer from a definitional problem. As a commenter here recently noted, drug cartels are actually not cartels; that’s part of why the competition between various gangs is so violent. So it can’t be the “cartel structures” that distinguishes gangs from other capitalist enterprises (many of which are much closer to cartels than drug gangs) that operate ruthlessly.

And while most purportedly legitimate businesses don’t kidnap (they leave that to the US government!), they do extort, though that usually takes the form of threats to take away market access.

At some point, when you take the violence away, the drug networks look like a significant group of very respectable American capitalist enterprises that use vicious techniques–that at least should and probably are illegal–to make money. At some point in this stage of the war on drug capitalists, we’re going to have to get a lot more specific about what makes these capitalists bad even though they use many of the same approaches the capitalists running our own country use.