• Sun
  • Dec 21, 2014
  • Updated: 4:26am

A convenient scapegoat apologises

PUBLISHED : Thursday, 19 July, 2012, 12:00am
UPDATED : Thursday, 19 July, 2012, 12:00am

HSBC says sorry to senate for drug money blunders

SCMP headline, July 18

Let's examine a little more closely just what it is that HSBC is said to have done. Here are some of the accusations from yesterday's news accounts:

The bank had routinely acted as a financier to clients routing funds from the world's most dangerous corners including Mexico, Iran and Syria.

So Mexico is a corner now instead of a country, is it? What an apt choice of word for a national libel. And it's not only a corner, nasty dark things full of creepy crawlies these corners, it's also a 'most dangerous' one. I had better tell my sister. She regularly goes there for holidays and keeps telling me I should come along.

But just who has determined that it is officially 'most dangerous' and since when has it been illegal for banks to operate in countries that this unknown entity has labelled as 'most dangerous'? Is it truly an offence to have clients who route funds from Mexico? Where is this an offence?

HSBC should also close its accounts with banks suspected of providing funding to terrorist groups, [Senator Carl] Levin said.

Certainly, Senator, and could you now please provide HSBC with a list of these banks? Could you also please provide it with indemnities against any defamation lawsuits it may incur when it turns out that some of the suspects on your list are entirely innocent of terrorism?

Terrorists don't rely much on bank funding. They need little money for their attacks and what they need they can access through private channels. If they do it through banks it's indistinguishable from the normal business of small commercial customers.

The Senate report said HSBC had little oversight of client accounts housed in a shell operation in the Cayman Islands, well known for offering secret accounts and a limited tax regime.

Note that word 'shell'. It does alternative duty with the word 'corner'. Note also the juxtaposition of 'well known' and 'secret'. Some secret.

But is it an offence for US citizens to maintain bank accounts in the Caymans or to benefit from a limited tax regime? If so, it is the job of US law enforcement agencies to take action against the Caymans. HSBC does not have police powers in the US. If it is not an offence, then HSBC is free to accept American clients for its Cayman Islands branch.

The Senate report detailed how, between 2007 and 2008, HSBC's Mexican operations moved US$7 billion into the bank's US operations. According to the report, both Mexican and US authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds.

Why in that case did these authorities not take direct action against the narcotics traffickers involved? If they have evidence beyond a reasonable doubt that anything Mexican in the billions is drug money, what were their police forces doing?

Once again, the basic difficulty here is that US authorities are asking a commercial bank to do the impossible. They expect it to front up their law enforcement efforts for them without giving it any powers to do so or workable definitions of what constitutes breaches of the law.

The bank has no problem dealing with precise directives. Tell it that it may not accept deposits in Mexico for accounts in the US of more than US$1 million per transaction or per day per client and it will follow that directive precisely. But tell it that its job is to head off the bad guys at the OK Corral and you just get a lot of head-scratching.

[The Senate report] also examined banking HSBC did in Saudi Arabia with Al Rhaji Bank, which the report said has links to financing terrorism.

Got an idea for you, Senator. Target your drone bombers on Al Rhaji Bank. It may be murder without trial on non-sovereign soil but your spy agencies do it all the time and no one has taken them to the International Court of Justice yet. Just whip up a report from anonymous sources who say there are links. It was enough to stage an Iraq war. It should be more than enough to splat a Saudi bank.

And here is the surprising thing in this story. HSBC has apologised to these arrogant and conceited politicians for not doing what they failed to do and what it cannot do.

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