“Steal a little,” wrote Bob Dylan, “they throw you in jail; steal a lot and they make you a king.” These days, he might recraft the line to read: Deal a little dope, they throw you in jail; launder the narco-billions, they will make you apologize to the US Senate.
Two months ago in Washington, a poor black man called Edward Dorsey Sr was convicted of peddling 5.5 grams of crack cocaine. Because he was charged before a recent relative amelioration in sentencing, he was given a mandatory 10 years in jail.
Last week, managers from the UK’s biggest bank, HSBC, lined up before the Senate’s permanent sub-committee on investigations — just across the Potomac from the scene of Dorsey’s crime — to be asked questions such as: “It took three or four years to close a suspicious account. Is there any way that should be allowed to happen?”
The “suspicious account” was that of a casa de cambio, a currency exchange house operated in Mexico on behalf of the largest criminal syndicate in the world and one of the most savage, the Sinaloa drug trafficking cartel. The dealings had been flagged up to HSBC bosses by an anti-money laundering officer, but to no avail — the dirty business continued.
“No, senator,” came the reply from a bespectacled Briton called Paul Thurston, chief executive of retail banking and wealth management at HSBC Holdings PLC.
The same casa de cambio, called Puebla, was known to be under investigation in another case involving the Wachovia bank during the time HSBC was entertaining its money. US authorities had seized US$11 million from Wachovia’s Miami office, on the way to securing the biggest settlement in banking history with Wachovia in March 2010, detailed in the Guardian last year.
Wachovia was fined US$50 million and made to surrender US$110 million in proven drug profits, but was shown to have inadequately monitored a staggering US$376 billion through the casa de cambio over four years, of which US$10 billion was in cash. The whistleblower in the case, an Englishman working as an anti-money laundering officer in the bank’s London office, Martin Woods, was disciplined for trying to alert his superiors and won a settlement after bringing a claim for unfair dismissal.
No one from Wachovia went to jail — and, said Woods at the time of the settlement: “These are the proceeds of murder and misery in Mexico and of drugs sold around the world, but no one goes to jail. What does the settlement do to fight the cartels? Nothing. It encourages the cartels and anyone who wants to make money by laundering their blood dollars.”
HSBC has been found to have handled US$7 billion in narco cash, “and this is the starter for 10,” Woods said recently. “We’ll get the full picture over time, but what’s the sanction on these banks? What’s their risk? The cartels should renegotiate their charges with the banks. They’re being priced for a risk element that isn’t there.”
Wachovia was not the first, neither will HSBC be the last. Six years ago, a subsidiary of Barclays — Barclays Private Bank — was exposed as having been used to launder drug money from Colombia through five accounts linked to the infamous Medellin cartel. By an ironic twist, Barclays continued to entertain the funds after British police had become involved after a tip-off, from HSBC.
The issue is wider than drug money. It is about where banks, law enforcement officers and the regulators — and politics and society generally — want to draw the line between the criminal and supposed “legal” economies, if there is one.