To grow up in South Florida during the 1970s and 1980s, as I did, was not your typical American childhood experience. Back then the area was known as the most dangerous place in the country.
Carnage from the drug wars filled the local news long before Miami Vice became a hit TV show. By elementary school, my friends and I knew some of the lingo. A Colombian necktie was not a piece of clothing, but a gruesome execution method. When I was seven years old my barber was murdered in his shop, apparently over a drug deal.
It had been a long time since I thought much about those days. By chance I recently came across a fabulous documentary, Cocaine Cowboys by Miami filmmaker Billy Corben. Then last month a US Senate panel held a hearing on the UK bank HSBC Holdings and its ties to drug lords, money laundering, al-Qaeda and rogue nations such as Iran and North Korea.
Here is a bank with US$2.7 trillion of assets that flouted US laws for a decade, according to the July 17 report by the US Senate Permanent Subcommittee on Investigations. HSBC turned a blind eye to organized crime, Mexican drug cartels and overseas terrorism financiers and gave them access to the US banking system. HSBC main US regulator, the Office of the Comptroller of the Currency (OCC), for years tolerated its violations of anti-money laundering laws.
For this, HSBC and the OCC apologized. US Department of Justice fines are likely. It is an outrage HSBC has not had its US banking licenses revoked, assuming the Senate panel report is accurate — and there is no reason to believe it is not.
Let us try out a novel idea: Banks that help drug cartels launder money and give cover to those tied to terrorism should be put out of business. Is that really so hard for everyone to agree on? Free markets have worked in the US because we have the rule of law. It is why so many investors from other countries want to do business here. When contracts are breached, courts can be accessed to enforce them. When individuals or companies commit crimes, they are supposed to be prosecuted and punished.
Except we have this mutant species of corporation called too-big-to-fail banks whose collapse might wreck the global economy. No financial institution in the US can survive a felony indictment. So these companies have become un-indictable, creating a perverse nonchalance regarding financial crimes. In 2010, Wachovia paid US$160 million to settle criminal allegations of laundering Mexican drug money. By then the bank had been bought by Wells Fargo & Co, and the justice department let it off with a deferred-prosecution deal. Usually the most that happens to management is someone resigns, as HSBC head of compliance, David Bagley, said he would at last month’s US Senate hearing.
What would it take for the government to really crack down on wrongdoing in the financial-services industry? What finally prompted the feds to do something about cocaine smuggling into South Florida long ago was the epidemic of violence it spawned.
A defining moment came in July 1979, when drug traffickers went on a shooting spree in broad daylight at the Dadeland Mall in Kendall, southwest of Miami. This was unprecedented. The gunmen arrived in a delivery van that had been converted into an armored personnel carrier. Two people were killed. Bystanders dove for cover. Cars in the parking lot were riddled with bullets from machine-gun fire.