OCC to Air Banks' Dirty Laundering

By Amanda Alix, The Motley Fool

Posted 7:39PM 09/17/12 Posted under: Investing

020000

 

Comments in red are mine!

 

There certainly has been no shortage of banking misdeeds lately, and it seems that one issue can scarcely wear out its headline welcome before another pops up to elbow it aside. From fraudclosure to shady securities, trading fiascos to LIBOR, there has been more than enough variety to sate even the most intrepid of financial-sector scandal seekers. More recently, another government investigation of dubious banking activity has come to light, this time to do with the laundering of drug and terrorists' money. (Still operating with impunity, no fear of repercussions whilst us 'ordinary citezens would have beena rrested and thrown into jail after the first offence, never to see the light of day again!)

Lack of oversight may have led to involuntary processing of illegal funds (Me thinks this is an exceedingly generous analysis of the bank scams)U.S. money-laundering probes of European banks have been taking place with some regularity over the past few months, but The New York Times reports that the Office of the Comptroller of the Currency, Department of Justice, and the Manhattan District Attorney have now turned their attention to some sketchy transactions between U.S. banks and foreign parties.

To put this into perspective, U.S banks have recently come under scrutiny, including JPMorgan Chase (NYS: JPM) , Bank of America (NYS: BAC) , and Citigroup (NYS: C) . JPMorgan is no novice in this regard, having paid an $88 million fine to the Treasury a year ago to settle a case whereby the bank's apparent lack of controls allowed the transfer of money from Cuba, Iran, and Sudan in violation of U.S. sanctions. Citi, which was issued a cease-and-desist order last spring, claims to be plugging holes in its oversight to prevent any further transgressions. Bank of America, for its part, has posted a full-page notice on its investor-relations page regarding its Anti-Money Laundering policy; time will tell how watertight that practice has proved to be.

As a result of prior inquiries, U.S. regulators and HSBC Holdings (NYS: HBC) are currently engaged in talks to settle accusations that HSBC exposed the American financial system to terrorists and drug traffickers by laundering money for countries such as Sudan and Iran. Just recently, the U.S. Treasury Department has sanctioned a preliminary settlement for Standard Chartered in its Iranian money-laundering probe, and ING Groep (NYS: ING) settled with regulators in June regarding an investigation into the bank's involvement with funds from Iran and Cuba. And who can forget Wachovia's $160 million settlement back in 2010 for allegations over money laundered by Mexican drug cartels?

Fool's take
None of the U.S. banks are being accused of deliberately dealing with sanctioned countries, or of knowingly laundering illicit funds for terrorist groups or drug cartels. (poor innocents didn't know what they were doing or whom they were doing it with! as if...)What they are being accused of is ineptitude, failing to enforce and oversee their own policies meant to prevent such breaches of security. A much less serious charge, certainly, and closing loopholes now will surely provide more of a measure of protection in the future.

Meanwhile, millions of dollars will be paid to the U.S. to settle these charges -- good news for taxpayers and the safety of the banking system, but not such great news for investors, who must be growing tired not just of the non-stop cash flow out of banks to pay for incompetent and bad behavior, but also of the reputational damage all this causes.