Of international banks and organized crime

Alex Krainer

Money laundering is rightly billed as the mother of all crimes or, the crime that enables all other crimes. Most organized crime operations—whether drug cartels, human trafficking networks, protection rackets, or other types of crime—generate large amounts of bulk cash. Cash enables these organizations’ crimes, but it also severely limits their scalability.

Consider that, according to the U.S. Treasury Department, in the U.S. illegal drug traffickers generate more than $1.2 billion per week. Mexican drug cartel busts have uncovered cash hoards of literally billions of dollars in banknotes. In the 1980s, Pablo Escobar’s operation allegedly spent $8,000 just on rubber bands to hold the banknotes together.

It’s not just a few “bad apples”

This all creates an obvious logistical issue and a security nightmare. The cash must be counted, stored and guarded in a secure warehouse, leaving it vulnerable to law enforcement raids, confiscation, or theft by disloyal gang members or rival gangs. Furthermore, using banknotes severely limits crime organizations’ purchasing and investing options.

To transcend these limitations, crime organizations need the services of money laundering banks and most Global Systemically Important Banks (GSIBs) provide these services as one of their core businesses. We know as much from many investigations conducted over the past several decades. For example, HSBC has a storied participation in drug money laundering, dating back to the Opium Wars in China in the early 1840s.

HSBC does Mexico

They entered Mexico in 2002 with the acquisition of the Bital bank and wasted little time developing the same business with the Mexican drug cartels. That business led to a major scandal only a decade later. A 2012 Congressional investigation exposed HSBC’s role in laundering cash for cartels and funding international terror organizations worldwide. HSBC had to admit to laundering at least $881 million just for the Sinaloa drug cartel.

Despite this, none of the HSBC executives faced prosecution, and the bank itself was fined $1.9 billion. While this sum sounds large, it represented less than 3% of the bank’s 2012 revenues. Of course, HSBC wasn’t the only bank engaged in laundering money for criminal organizations.

Banks like Deutsche Bank, UBS, Citigroup, ING, Danske Bank, Credit Suisse, Wells Fargo, Societe Generale, TD Bank and BMO all got caught red-handed working with organized crime, laundering billions of dollars for terrorist organizations and drug traffickers, which enabled their criminal activity and empowered their organizations.

Cartels are like a Fortune 500 company

In a 2014 interview with Donald Trump Jr., Trump’s border czar Tom Homan said that, “The cartels are like a Fortune 500 company. The Sinaloa cartel is in over 40 countries around the globe. They’re in every major city in the United States.” Sinaloa cartel could not have scaled their operations that widely without an active support from their bankers like the HSBC.

Unfortunately, whatever information about these important issues reaches the general public is invariably presented as just some bad apples in some bank who work with drug cartels or the mob out of their own personal greed. And what we learn about money laundering comes in the form of justifications for increasingly draconian regulations that only affect ordinary citizens and legitimate businesses, making their lives difficult. Meanwhile, the cartels are thriving and record numbers of people are addicted and dying of drug overdoses.

A culture of fraud

None of the above is particularly controversial, but what’s less well understood is how money laundering works from inside banking organizations. John Cruz, an HSBC whistleblower gave us a fascinating glimpse into the HSBC’s criminal operations in a 2016 interview that’s still available on YouTube. Cruz encountered a fraudelent transaction on his first day on the job, and terminated the account. He subsequently discovered that the account had been reopened and transactions were made in his own name, as if he had initiated them.

From that point on he “started recording all conversations with other employees, superiors, law enforcement, Congressmen, attorneys… everyone,” and said that, “what they do in e-mails is totally different from what they do in voice recordings.” In all, Cruz claimed that HSBC laundered over $200 trillion and created a culture of fraud within the organization. Here are some of the most fascinating insights Cruz shared:

• Impunity before the law: “HSBC did not pay a $1.9 billion fine. The investors paid the $1.9 bn fine. The bank paid nothing. … The Congress doesn’t even know where the money went. It went through the Obama Administration, Loretta Lynch, Eric Holder, Barack Obama, Hillary Clinton. Nobody knows where the money went - other than those individuals.”
• “Semantic errors in naming of accounts”: “When you put a dash or a dot, you put them in certain places within the computer system, you are creating a coding system. So when I go in and I create accounts for customers to launder money and I open the account on May 1st, and I want to launder a billion dollars this month for these certain accounts. So I launder the money. On June 1st, I’ll go to those accounts that had periods and dashes and have my computer system close those accounts April 30th - the day before they were opened, because the money that’s already transferred around the world, now the accounts and transactions will be terminated from the system.”
• 10% for the government: “The biggest part is, you’re not filing the ‘suspicious activity report’ on either end of the transaction. … the senior auditor in HSBC bank told me point blank, ‘we do this, we keep 10% on the side, and that’s for the payment to the U.S. Government.’ “
• Banks investigate themselves: “Law enforcement gives the bank a 100% control of the investigation of money laundering. When I turned over all my documents to district attorneys, they said, ‘we will contact the bank and have them do an audit on your complaint.’ What does that mean? You reach out to the criminal, ask them to investigate themselves and ask them to please let them know if they find that they did anything wrong.”
• Comply with the law, get fired: Cruz complied with the law by reporting the fraud at the bank to law enforcement. If he had not done so, he could have been prosecuted and imprisoned. At the same time, the bank was legally within its rights to fire him, which begs the question of how these banking regulation laws were drafted and by whom.

The Empire of Lies and organized crime

The more we learn about the nexus of politics, organized crime, intelligence agencies and international banks, the more it appears that our system favors, cultivates, and protects organized crime. For decades industrial-scale criminal enterprises like the rape gangs in Great Britain and the drug cartels in the U.S. continued to operate and expand right under the noses of law enforcement, even setting aside “10% for the government.”

With the government paid off, the criminal class get to investigate themselves and sack whistleblowers who comply with the law. In other words, organized crime has infested the whole system, holding entire nations hostage. Lord Acton said that, “​The issue which has swept down the centuries and which will have to be fought sooner or later, is the people versus the banks.” That may be the literal truth of the present predicament of our societies.