HSBC Criminal Charges: Bank Escapes Harsh Penalties Because of Importance to Economy


With the news that the Treasury Department is making a $22.7 billion profit on its bailout of American International Group, it almost makes you feel good about the relationship between the public sector and financial institutions. And then comes the news about HSBC.

The bank is being described as “too big to indict.” On Tuesday, it agreed to a $1.92 billion settlement with the U.S. government when it was deserving of more serious criminal charges related to money laundering.

In July, a Congressional committee outlined how HSBC, between 2001 and 2010, “exposed the U.S. financial system to money laundering and terrorist attacks.” A lot of hand wringing went on behind the scenes in which government officials considered indicting HSBC on money laundering charges, which would mean its charter to operate in the U.S. could be revoked. But, it never happened despite the evidence because of the consequences.

One example of HSBC's behavior related to its knowing or unknowing support of Mexican drug cartels. Government officials reportedly warned the bank to increase its safeguards when moving money out of Mexico but the bank instead classified the country as low risk for money laundering and helped transfer $7 billion to the United States. A sum that law enforcement officials said had to be "illegal drug proceeds."

That sounds like egregious behavior and is only one example, others relate to work the bank did with the Saudi Al Rajhi bank, which has supported Al Qaeda, according to a Congressional report.

Instead of indict or pursue the case, the government settles. It is probably the responsible move. But that doesn’t make it the right one.