
Why the U.S. Treasury Killed a Latvian Bank - marksomnian
https://www.forbes.com/sites/francescoppola/2018/02/28/why-the-u-s-treasury-killed-a-latvian-bank/
======
freddybobs
"At their scale, that's a small fine. Barely 10% of annual net profit."

HSBC was the bank of money laundering of the mexican drug cartels. They also
helped fund terrorist organisations like ISIS. They made it possible to at
scale deal drugs in the US.

When they were caught doing this - they shrugged and said they'd try better.
Then they got caught doing it again. And they said sorry.

Eventually the government was aiming to indict the bank. There would be
criminal charges. People would go to jail.

It is a small fine compared with their conduct. They got 'let off' at the last
minute arguably because of 'systemic risk'. Too big to fail. Again.

You can find all about it on Dirty Money on Netflix.

~~~
jimrandomh
> "At their scale, that's a small fine. Barely 10% of annual net profit."

That quote does not appear in the linked article. Where does it come from, and
who is "their"?

~~~
freddybobs
Sorry - that was from a comment below, and wasn't really what I was responding
to. 'Their' means HSBC.

Assuming the documentary is accurate - that HSBC was the go to bank for money
laundering. That was a big part of their business. That they went out of their
way to hide transactions from the government (like transactions to ISIS and
cartels). When caught they repeatedly got away with a shrug. That 100k people
have been murdered related to mexican cartels - and the claim is that mexican
cartels couldn't have operated at that scale without HSBC.

I was responding to the comment below that seemed to be saying the fine was
'big enough'. Which the documentary didn't agree with. The people that brought
the charges and investigated HSBC didn't think so. Neither did the journalists
who were there when the government tried to pass off the deal as a big
success. The management didn't lose jobs. The worst that happened to them was
that part of their bonuses were kept back.

Oh and the government dropped all charges in 2017. That part of the deal was
the charges remained - ie they did commit crime but suspended sentencing.

[https://www.reuters.com/article/us-hsbc-usa/hsbc-draws-
line-...](https://www.reuters.com/article/us-hsbc-usa/hsbc-draws-line-under-
mexican-cartel-case-after-five-years-on-probation-idUSKBN1E50YA)

[https://inhomelandsecurity.com/hsbc-cartel-money-
laundering/](https://inhomelandsecurity.com/hsbc-cartel-money-laundering/)

[https://www.rollingstone.com/politics/news/outrageous-
hsbc-s...](https://www.rollingstone.com/politics/news/outrageous-hsbc-
settlement-proves-the-drug-war-is-a-joke-20121213)

(edit: grammar/spelling fixes)

------
curiousgal
Tl;DR: They thought they were laundering money.

~~~
sschueller
I guess if you are big enough you only get a small fine. e.g. HSBC

~~~
JumpCrisscross
> _small fine, e.g. HSBC_

HSBC was fined nearly $2 billion [1]. (Still a shame none of the complicit
went to jail.)

[https://www.marketwatch.com/story/netflix-documentary-re-
exa...](https://www.marketwatch.com/story/netflix-documentary-re-examines-
hsbcs-881-million-money-laundering-scandal-2018-02-21)

~~~
madaxe_again
At their scale, that's a small fine. Barely 10% of annual _net profit_.

~~~
JumpCrisscross
Better metric is relative to Mexican, or North American, profits. Those are
the markets in which they did their shenanigans. Relative to those, it’s a
substantial absolute and relative sum.

~~~
wavefunction
You have to make the entire organism pay a price or else it gets laughed off
as a temporary setback.

Jail these folks, and the folks they reported to. You start throwing some
bankers in jail and you'll see some magic "self-regulation" kick in.

~~~
jessaustin
The last thing federal prosecutors want to do is make rich and powerful white
people worry. They know which side their bread is buttered on.

------
nraynaud
I don’t see a lot of due process in this execution. Upholding the values of
the constitution is only a week-end hobby?

~~~
sathackr
Our government feels that the "all men" in "all men are created equal, that
they are endowed by their Creator with certain unalienable rights" really just
means US citizens.

The courts have held over and over that our constitution does not protect the
rights of non-citizens. That's why we can legally execute a 'terrorist' in
another country with a missile fired from a drone without even so much as them
being charged with a crime. With all the false convictions of US Citizens that
make it through our "due process," I wonder how many of those extrajudicial
executions were based on incorrect information?

Rarely do they even want to respect the constitution for actual US citizens.
The protections and rights granted are slowly being chipped away by the
executive and legislative branches, and now even the judicial branch is
becoming politicized.

------
fulafel
"Since the U.S. dollar dominates international transactions, banning U.S.
correspondent banking relationships with ABLV amounts to shutting it out of
the global financial network"

How does this figure? Anyone can buy/sell USD on the global FX market, and so
pay/accept USD, no?

~~~
wtfstatists
No because to _really_ hold USD, your bank would need its own account on
FedWire [1] (USD's Real Time Gross Settlement) in which money is legally
guranteed. Alternatively your bank can have an account with a bank (called
Correspondent Bank) that have account on FedWire.

Any more indirections would be too risky. If your bank has neither, then no
other bank would talk to your bank over SWIFT/CHIPS/RIPPLE/etc, making your
bank basically banned from USD banking.

Usually and and in this case, even accusations or investigation of money-
laundering/etc would make a CB to derisk [2][3] and proactively cancel account
of accused bank or CB would risk access to FedWire. This is how USG was able
to force FATCA over the world.

[1]
[https://www.federalreserve.gov/paymentsystems/fedfunds_about...](https://www.federalreserve.gov/paymentsystems/fedfunds_about.htm)

[2]
[https://google.com/search?q=correspondent+bank+de+risking](https://google.com/search?q=correspondent+bank+de+risking)

[3] [https://www.americanexpress.com/us/content/foreign-
exchange/...](https://www.americanexpress.com/us/content/foreign-
exchange/articles/fedwire-us-dollar-in-international-payments/)

~~~
twic
> Any more indirections would be too risky.

I'm not sure this is quite true. There is a thriving and legitimate market in
"eurodollars", deposits denominated in US dollars but held outside the US, and
specifically beyond the reach of US authorities.

The question is whether you would be able to make much use of such deposits
without US cooperation. It would definitely be difficult, but it might be
possible. I am by no means an expert on this, but i came across an interesting
case from the '80s - Libyan Arab Foreign Bank v Bankers Trust Co. Section 3.4
of this book describes it:

[https://books.google.co.uk/books/about/Freezing_Assets.html?...](https://books.google.co.uk/books/about/Freezing_Assets.html?id=34WwCwAAQBAJ&redir_esc=y)

And there's a wider discussion here:

[http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?a...](http://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=1622&context=auilr)

The upshot is that a UK judge decided that it was possible to pay out a dollar
balance held in London without involving the US. It seems there were several
plausible ways to do it. Whether that's still true, i have no idea.
Interesting stuff, anyway.

~~~
wtfstatists
I am just reading off internet too. So I may be wrong.

In large indirections (or nesting), there is risk for both depositer and CB.
Depositer would have to trust more banks in the chain. For CB nesting means
harder to be KYC/KYCC/AML complient [1]. Due to the recent and growing
derisking phenomena, nesting is not going to survive.

Eurodollar reads like just another name for correspondent banking, which was
also used to escape USA regulations. But no longer works. In 2016, BofA
dropped Belize Bank (largest bank by assets) after 35-yrs of relationship with
no explaination other than regulatory pressure [2]. And thats how USG get a
bank whereever it might be.

Regarding "a dollar balance held in London", unless you mean hard cash, the
amount is just a ledger entry in FedWire. So US is very much involved [3].

[1] [https://bizfluent.com/info-10002124-correspondent-payable-
th...](https://bizfluent.com/info-10002124-correspondent-payable-through-
nested-account.html)

[2] [https://www.reuters.com/investigates/special-report/usa-
bank...](https://www.reuters.com/investigates/special-report/usa-banking-
caribbean/)

[3]
[https://en.wikipedia.org/wiki/Society_for_Worldwide_Interban...](https://en.wikipedia.org/wiki/Society_for_Worldwide_Interbank_Financial_Telecommunication#U.S._control_over_transactions_within_the_EU)

