The article (and the "Mafia Expert" it's about) are both idiotic. The premise is that because corruption involves money and money involves banks and London has lots of banks, transitively, London is very corrupt. It then tries to equate Mafia violence with financial firms refusing to hire 'whistleblowers', as if having your legs chopped off is in any way comparable to having a career issue.
By similar logic, I could claim that Washington DC is the most violent city in the world, because the illegal drug trade is very violent and drugs are illegal because of politicians and there are lots of politicians in Washington DC.
If you hold a position of trust (elected politician, policeman, bureaucrat, CEO, board member, employee representative, union boss), and you use the powers of that position to further some private interest rather than the interests of those you are set to serve, then you're corrupt. That's more or less Transparency International's definition, and I agree with it.
But banks' trustees aren't the public. It's their depositors, shareholders and customers. And by most accounts, they serve those reasonably well.
So yeah, they could maybe make a case that Britain is the most corrupting country in the world. But that is not the same thing. Compared to other nations, Britain's public trustees probably aren't so bad at serving the interests of the public.
> Compared to other nations, Britain's public trustees probably aren't so bad at serving the interests of the public.
Dave & Co have probably been the worst offenders in recent recent years for selling public assets and companies they have nationalized to buddies of theirs at massively discounted prices, beginning with the RBS.
"some of the City’s biggest investment banks – including Goldman Sachs and UBS – are charging the government a £1 fee for work that would normally cost tens of millions of pounds."
"Oliver Holbourn, head of market investments at UKFI, said some City firms had even offered to pay the government to work on its privatisations."
"The banks, however, eventually concluded that such arrangements could be an offence under the US foreign corrupt practices act."
The Royal Mail would be a much better example of that; but then that happened on Vince Cable's watch (a part of then David's coalition). Of course the banks involved were accused of providing bad advice according to a committee of MPs; in particular undervalued property owned by Royal Mail.
I don't think Dave has yet surpassed Bliar and Brown. Especially once you include public private partnerships and the lifetime of debt landed on the schools and hopsitals as a result.
"the share price had been at 400p as recently as February, leading critics to blast the decision to sell now and question the relationship between banks and the Treasury"
You wouldn't even be arguing that. You'd be arguing that money corrupts people, and because there's lots of international money managed by the UK, the UK is therefore "corrupting".
So what? Money corrupts, this is not news. In any economy where you have regions of the world that specialise, there will be regions with lots of banks.
> The premise is that because corruption involves money and money involves banks and London has lots of banks, transitively, London is very corrupt.
The premise was that the banks of London launder huge amounts of drug money... I don't necessarily agree with this article but you're just avoiding the points it makes.
Money laundering used to have a fairly precise definition when the crime was first invented in the 1970's: "knowingly working to disguise the origins of money gained through crime". But over time various people (primarily aggressive tough-on-crime politicians) have watered down the definition until it's now more like "any financial transaction that someone somewhere doesn't like".
We can see the slide in the USA PATRIOT Act which removed the "knowingly" from the original definition. Now you can do money laundering without even being aware of it, under the American definition, simply by interacting with money that was earned by criminals.
Once they started chipping away at the mens rea requirement, the standards had to be redefined. Now it's not enough to avoid money you know to be criminal. You also have to avoid money you merely suspect might be criminal, lest it later on turn out to be the result of crime and you get sucked in after the fact. Hence banks turning away people who want to deposit cash. The fact that the cash has innocent origins is insufficient.
Then they went further and defined money laundering as failing to do 'enhanced due diligence' on any transactions related to a 'politically exposed person'. There is no clear definition of either term, meaning banks have to make it up as they go along. But the spirit of the law is that a PEP is anyone who might conceivably be corrupt. This was meant to fight corruption by forcing banks to investigate anyone who might be receiving bribes. With no definition and heavy penalties for non-compliance, which by this time is entirely in the eye of the beholder, private firms sprang up to compile blacklists of PEPs, some of which contain millions of people. There is of course no way to get yourself off such a blacklist.
Now throw sanctions compliance into the concept of money laundering and now you can be an evil corrupting money launderer simply by processing a payment from a firm in country A to a firm in country B where there are no laws in either country A or B against the trade, and the firm in country B is run by a guy who some powerful bureaucrat has decided is in some way shady. No evidence or trial is required and there's usually no way to get yourself off such sanctions lists. One US list of sanctioned people is simply a list of names with no other clarifying information, meaning people with generic names end up being treated as guilty-until-proven-innocent.
By the time we're done, you realise that every bank in the world is guilty of the modern definition of money laundering, simply by virtue of working with money.
If you're interested in the topic of abuse of AML laws, read the book "Treasuries War".
These secret lists are a real problem. I have to hope that no one sharing my name does anything wrong (or is put on one of these lists by mistake). When will the people in charge of these programs realise that names are not a unique identifier.
How do you feel about HSBC being convicted of money laundering? Do you feel that they were wrongly convicted based on the original definition of the term?
They were not convicted of anything, if you're referring to the Mexico/Iran story which I guess you are. You heard the US Government's side of the story. The USG agreed not to take the charges to court as long as HSBC accepted big fines and didn't say anything (i.e. didn't attempt to defend itself in public). So there was never any court case or any judicial process involved.
If you hear only the government's story and the other side is gagged, the listener will always conclude the perp is guilty. You can dig in and find the other side if you like: I did. The case looks a lot less clear, then. For instance HSBC was accused of laundering lots of money for Mexican drug cartels. Most people think that means "knowingly laundering". It doesn't: the money in question actually came from remittances firms. The American's case was something like this: there's so much money being remitted across the border, there must be drug money in there. HSBC is moving money for remittances firms. Therefore HSBC must be moving drug money without knowing. Therefore their AML standards are too low, therefore they are money laundering.
As you can see, I am not sympathetic to this kind of logic or "justice". Certainly the US case would not have been successful in court under the original definition as they never presented evidence any kind of conspiracy inside HSBC to launder drug money. The allegations revolved entirely around HSBC not trying hard enough, which is not the same thing.
Actual convictions for anti-money laundering offences are very rare. This kind of fine-and-silence outcome is much more common.
The reasons are simple. The current situation is kind of like a Cuban missile crisis. It's very volatile and unstable. Every banker knows that every banker is guilty of some kind of AML offence, because it's impossible to work in finance and not be guilty. The laws are just that badly written. What's more, western governments know this too. Almost every big bank has been fined under AML laws in the past 20 years or so.
But American justice is extremely vicious (and it's in America where the whole idea of anti-money-laundering originated). Like many laws, AML offences can carry 20 year jail sentences.
If you mix 20 year sentences with "everyone is guilty" you have a situation that is like a minefield. If the government actually started prosecuting bankers under these laws, there's a risk they might win and that could be apocalyptic - it could trigger a collapse of the entire financial system as bankers exited the industry en-masse.
In the HSBC case, one part of the US Gov (either Treasury or DoJ, I forget which) actually did want to prosecute. The other part convinced them not to, using the above logic. The chance of successfully jailing a banker is high enough that they can't actually do so, lest it cause the industry to self destruct.
You're attempting to imply that HSBC was an innocent party, and that's simply nonsense.
HSBC was fined because it failed to follow the rules put in place to prevent money laundering. Often it completely failed to make any attempt to follow those rules. E.g.
"...The monitor’s findings described several incidents, among them one where an HSBC branch in Sinaloa, a Mexican state that has experienced much drug-related violence, opened a private-wealth account for a 19-year-old man who arrived with a bag containing thousands of dollars in cash. The man described himself as a shrimp farmer."
There was a consistent pattern of failing to flag, investigate, or report transactions that were clearly suspicious.
That's why HSBC was fined. There's no grey area here, and the laws aren't particularly onerous. They were simply ignored.
>it could trigger a collapse of the entire financial system as bankers exited the industry en-masse.
Considering the close association between banks and fraud/criminality, that would hardly be a bad thing.
So far in the UK we've had prosecutions for fraudulent mis-selling of payment protection insurance; fraudulent mis-selling of premium accounts; LIBOR rate fixing; forex rate fixing; and insider trading.
Last month DB settled out of court with traders who alleged - and provided evidence - of precious metal price fixing.
The entire financial industry is rotten to the core. It's the single biggest destroyer of genuine economic growth in the planetary economy, and it also has anti-democratic political influence which operates outside the usual constitutional checks and balances.
There is nothing remotely positive here. The industry needs to die, and it needs to be replaced by completely new structures and institutions that use the profit motive as an excuse for criminality in quite the same psychopathic ways.
> HSBC was fined because it failed to follow the rules put in place to prevent money laundering.
First, failing to follow rules put in place to prevent money laundering is not itself money laundering. Just like failing to follow rules put in place to prevent traffic accidents is different than driving your car into someone.
Second, the true story is one degree removed even from what you say. A key element of the government's case against HSBC was that it classified Mexico as "standard or medium risk" when classifying it as high risk would have triggered additional controls intended to prevent money laundering: https://www.justice.gov/sites/default/files/opa/legacy/2012/... (pages 7-8). The government states that HSBC "should have known Mexico was high risk" based on various publications discussing money-laundering risks in Mexico.
HSBC was not an innocent party, but it was guilty of regulatory rather than criminal violations. It failed to put country X in risk category Y; it failed to adequately staff it's AML department, etc. For those regulatory violations, it paid a fine, which was the appropriate punishment.
You're attempting to imply that HSBC was an innocent party
Not quite. I said explicitly that all banks are guilty of violating AML laws, because it's impossible not to be guilty.
You then go ahead and prove my point: someone turned up with some cash, and gave an explanation of where he got it. The banker in question accepted the story and the monitor found it to be "clearly suspicious".
"Suspicious" is such a vague standard that nobody can ever comply with such laws. There will always be transactions that are debatable, grey area, or turn out to be suspicious in hindsight but weren't at the time. Your own example proves this: apparently if you ran a bank nobody would ever be able to open an account and deposit money there, which is a problem, because being able to do that is kind of the point of having banks.
The story you link to admits as such in the very next paragraph after the shrimp farmer quote:
Compliance officials who must decide whether a bank should open an account or extend a loan can face a tough job, having to make the call based on the movement of money through existing accounts or sketchy data such as local knowledge and material found online. Regulators want to see signs that compliance departments are at least flagging suspicious transactions and customers. That didn’t appear to happen in the Sinaloa matter.
Maybe people open accounts that way in this part of Mexico all the time? Heck, maybe the person who opened the account thought it was suspicious but was afraid of turning up inconveniently dead if he turned the guy down. It's very easy for Americans to sit around on their Aeron chair in nice safe Washington DC and criticise people on the front line of the drug war for not trying hard enough.
But I'm not sure I'm arguing with a reasonable person. Your response to "the banking system might collapse" is "that would hardly be a bad thing", which is a position so far out that I doubt you will ever change your mind. What's your intended alternative? Bitcoin?
That said, my focus in this thread has been on money laundering rules, not trading fraud.
The American's case was that HSBC frequently circumvented the rules designed to prevent dealings with Burma, North Korea and Iran.
That they did not disclose tens of thousands of sensitive transactions when they should have.
That when setting up banks in Mexico they marked them as low risk when they should be marked as high.
That their Japanese branch accepted huge blocks of sequentially numbered travellers cheques that originated from Russia without applying any scrutiny.
Is all of the above just 'moving money for remittances firms'? Or is it the US govs propaganda, reprinted by the BBC?
Your comment just seems winding and lacking logic. First you argue that HSBC didn't really do anything wrong and then that the US gov didn't even want to prosecute them because they knew the consequences would be 'apocalyptic'. If these things are both true then why did HSBC settle out of court? Why did they publicly appologise? Why not just see the case through to save face and $1.9 billion.
The payments in question were legal at the time: they were from countries that did not have sanctions against Iran to Iran.
The Americans took a novel position in that case: that because the payments were denominated in dollars and were processed by computers in New York, American sanctions should apply to foreign payments. They then proceeded to punish HSBC for "evading sanctions" that didn't actually exist. It did achieve one thing though: it sent a powerful message that US law is in fact international law.
Saying "Mexican banks should have been high risk instead of low risk" is the kind of subjective judgement call that highlighst my entire point. Maybe the high risk category was reserved for places like Congo or Nigeria or Pakistan, and Mexico - being a relatively stable state that engages in heavy trade with America - did not justify the same level of scrutiny as those.
My logic is very simple. The laws are so vague that any kind of activity can be retroactively labelled as 'suspicious' and thus illegal. But that is not the rule of law.
Your final paragraph shows you didn't understand what I wrote at all. HSBC is absolutely guilty of violating AML laws, as are all other banks, and if they went to court then a whole lot of bankers would have gone to prison for a long time ... just for engaging in the business of banking. This is not in the best interests of society because we then might find ourselves without banks, and neat though such a world might seem, we'd need an alternative first.
The public apology was a part of the plea bargain struck with the US Gov. They were forced to do it. You'd do the same if the alternative was spending the rest of your life rotting in jail.
There's no problem with prosecuting bankers under laws that are tightly written and which can only be violated knowingly. The apocalypse case can only occur if bankers feel like they have no way to avoid being guilty, which is certainly true under AML laws but not really true under many other kinds of laws (like ordinary fraud).
How can you honestly think that after reading this thread?
The parent comment may or may not be correct (I honestly don't know), but author makes it really, really clear what his logic is, and it's nothing like it.
If you came to such a conclusion, it means that you skimmed through the comments above in 2 seconds, and not even trying to understand what was actually written.
Oh, I read the thread. The problem with his logic is that it leads to the conclusion of systemic importance; it's the same argument as too big to fail, in a different guise. If the evidence truly is enough to convict in court, isn't it antithetical to the rule of law not to convict, and accept settlements instead?
Size of organizations involved was never mentioned, so I really don't see how it's related to "too big to fail".
His logic was completely different, and pretty straightforward: that anti-laundering legislation first threw mens rea out, and then ended up in a state where everybody is guilty be default.
It's an analagous moral hazard, though. Even if bringing a bank down threatens the banking system, it must be done otherwise banks act with impunity. It's little different with bankers and "stupid and illogical law" - if we rely on discretion for which laws we apply, then we're entirely corrupt. We must apply the laws we have and live with the consequences, otherwise we don't live in a lawful society.
I see this as an absolute. I don't really see how it can be otherwise.
> The premise is that because corruption involves money and money involves banks and London has lots of banks, transitively, London is very corrupt.
I thought it was based on the premise that:
London is the drug money laundering capital
of the world
and:
90 per cent of drug cash ends up in
the US and Europe via London
and:
criminal corporate activities within the City of
London which have dominated the headlines
over the past decade
and:
an alternative metric for financial corruption
[puts Britain and its dependencies] top of the list
and:
the four companies in line to buy [from the Government]
the UK Land Registry [which tracks the (often foreign)
ownership of UK properties] are all based in or have
close links to the offshore tax havens of Jersey,
Cayman Islands or Delaware
> career issue
AKA:
powerful financial firms will destroy the lives
and reputations of whistleblowers [claiming] a
100% success rate
From the BBC page linked to under 100% success rate:
The BBC spoke to one such whistleblower who wrote
to the FSA [UK financial services regulator] on
numerous occasions with his concerns about
behaviour at his then-investment bank.
The FSA refused to act on the information
and even requested that the whistleblower
never contact them again.
If the British Prime Minister is happy to defame other countries by name, then the UK should be prepared to have its own monumental corruption problems put under the spotlight.
This is about financial corruption; corruption in other spheres - police, judiciary and politics - is rife in the UK too.
The only question about whether the UK is the "worst" is whether other so-called open, accountable democracies are any better, which I doubt.
But it's about time we started putting our own house in order, instead of blindly pointing the finger at the usual suspects, poor developing countries, who can only dream of having corruption so established that it's not even referred to as such; and when someone does call it what it is, people instinctively write it off as "idiotic".
The quote about a "100% success rate" is meaningless. It comes from here:
According to our whistleblowing source, who has been asked to give evidence to the new Parliamentary Committee on Banking Standards, set up in the wake of the Libor scandal in June, banks tend to take a very dim view of employees who break ranks.
"No risk manager wants to admit that he didn't do his job. So an unholy alliance of mutual self-interest kicks in," the source, who asked to remain anonymous, said. "So they'll do anything to bad-mouth a whistleblower as an underperformer. They have a 100% success record."
This is literally a figure of speech from a single guy who considers himself to have been "bad-mouthed as an underperformer", yet in the Independent article it became:
Powerful financial firms will destroy the lives and reputations of whistleblowers. Newsnight found they have a 100 per cent success rate
... which not only mis-attributes the quote but makes it sound like an actual statistic related to "destroying lives".
This is the worst piece of journalism I've seen for a while.
I wasn't addressing the veracity or otherwise of the "100% success rate" claim, I was using a different quote from the article that was linked, stating the UK's financial regulator told a whistleblower to not contact them again.
Here's another quote from it:
Newsnight can reveal that not a single UK-
based bank has ever been punished for firing
a whistleblower within its ranks - even though
these individuals are protected in law
Debating whether the UK is the worst or not, or whether financial firms have a 100% or perhaps merely just a 86.4% success rate at destroying honest people's lives and/or careers is a distraction.
The issue is that the UK has serious corruption and (organized) crime problems, seemingly tolerated (at best) at some of the highest levels in the UK.
However hyperbolic you may find the journalism to be, it's a lot more instructive and interesting than yet another bullshit list designed to show just how jolly honest and law abiding we are, compared to the developing world.
> The issue is that the UK has serious corruption and (organized) crime problems, seemingly tolerated (at best) at some of the the highest levels in the UK.
The "Mafia Expert" (sic) is an investigative journalist and writer, fairly famous in Italy, which for his work has received enough death threats that he will probably have to live under police protection the rest of his life...
I would like to shed some light on this "mafia expert".
Saviano is officially known in Italy to be a writer, way more than a journalist - actually he was completely unknown before his first book "Gomorra", which made him famous, and he admitted not to be "a journalist, (nor a reporter), ... but a writer" (http://www.thedailybeast.com/articles/2015/09/24/mafia-autho...). I would add that in Italy he is pretty known to be a good show-man, even more than a writer.
Not that i have any aversion to Roberto Saviano, but i would strongly prefer to see Giovanni Falcone being mentioned, above and before any other real (or so-called) anti-mafia warrior (anti-mafia means a lot of professional layers of "antiness").
By similar logic, I could claim that Washington DC is the most violent city in the world, because the illegal drug trade is very violent and drugs are illegal because of politicians and there are lots of politicians in Washington DC.