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Comparing IBCC to HSBC/Standard/Barclays

In the executive summary of a long online article entitled, Bank of Credit and Commerce International – The BCCI Affair, a group calling itself the American Patriots Friends Network (APFN) lists certain key offences, the reasons for the foreclosure of the multi-national bank. It says BCCI “constituted international financial crime on a massive and global scale,” that it “systematically bribed world leaders and political figures.”

The APFN also says: “BCCI’s accountants failed to protect innocent depositors and creditors from the consequences of poor practices at the bank of which the auditors were aware for years.” It adds that IBCC’s “commodities affiliate, Capcom, engaged in billions of dollars of anonymous trading in the US which included a very substantial amount of money laundering.”

Today, Ti-Kelenkelen finds that very interesting, because in 2006 several top US banks, according to news reports, indulged in financial speculation and lost billions belonging to “innocent depositors and creditors.” The scandals were so pervasive and so deep threatening some with imminent closure, according to financial experts. US citizens were angry with the banks, but federal financial authorities and regulators did not close them down. Rather the Bush and later Obama administrations gave those banks billions of US taxpayers’ money to help them stay in business.

Money laundering for criminal gangs, losing depositors’ and creditors’ money, dealing with rebel/terrorist groups and poor banking practices and self-regulation – keep those offences in mind as you read the next section.

Case Against HSBC, Standard

In an article entitled, HSBC Mexican Branches Are Traffickers’ Choice, Bloomberg News reportedon December 12, 2012 that: “HSBC Holdings Plc (HSBA)’s Mexican branches had become so well-known to drug traffickers as the place to launder proceeds from illicit sales that cartels began using special boxes [that fit the teller’s windows] to speed transactions, U.S. prosecutors said.

“From 2006 to 2010, the Sinaloa [drugs] cartel in Mexico and the Nortedel Valle [drug] Cartel in Columbia moved more than $881 million in proceeds through HSBC’s US unit, said Lanny Breuer, the Assistant Attorney-General for the U.S. Justice Department’s criminal division…

“In total, the bank’s US and Mexican units failed to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of US dollars from HSBC Mexico, Breuer said.

Last week, the US Under-Secretary for the Treasury, David S. Cohen, said: “Because of HSBC’s ‘egregious breakdowns in anti-money laundering compliance,’ trillions of dollars in wire transfers every year were excluded from its review, billions of dollars in ‘suspicious bulk cash’ entered its vaults, and hundreds of millions of dollars in ‘dirty money’ from Mexican drug proceeds went through the bank’s US accounts.”

Also, “despite the well-known illicit finance risks associated with Mexican drug trafficking organizations, HSBC inexplicably placed Mexico in its lowest possible risk category,” Cohen said adding, “As a result, it allowed billions in wire transactions and bulk cash to pass through its gates with minimal if any monitoring.”

Investigators also found that – like IBCC – HSBC also breached what it terms Dealing With The Enemy Act. According to the story: “HSBC also allowed about $660 million in transactions prohibited by the Office of Foreign Assets Control to be processed through US financial institutions from the mid-1990s through 2006, and followed instructions from sanctioned countries, such as Cuba and Iran, to omit their names.

“…In 2006 several top US banks… indulged in financial speculation and lost billions belonging to ‘innocent depositors and creditors.’ The scandals were so pervasive and so deep threatening some with imminent closure… Rather the Bush and later Obama administrations gave those banks billions of US taxpayers’ money to help them stay in business.”

“The bank engaged in payment practices that violated US law and interfered with economic sanctions, such as forwarding messages to US banks that said that an HSBC affiliate was the ordering institution and not individuals or entities subject to US sanctions.” Cohen said adding, “… They also found 10 transactions involving $21 million in apparent violation of sanctions against Burma, Iran, Sudan and Zimbabwe — including one that involved the purchase of 32,000 ounces of gold bullion for the central bank of Iran.

“The bank failed to manage its money-laundering risk or implement adequate programs to protect itself, didn’t identify and report suspicious transactions, and didn’t hire, train, equip or support compliance officials or give them sufficient authority,” Cohen affirmed and added, “In all, HSBC’s wholly inadequate money laundering practices and procedures left dangerous gaps that international drug traffickers and other criminals readily abused.”

Also according to aBBC business report: “The [regulatory] committee is [also] concerned that HSBC cleared large amounts of travelers’ checks over a number of years, without proper anti-money laundering controls, despite evidence of suspicious activity.Between 2005 and 2008, HBUS cleared $290million worth of US dollar travelers’cheques which were being presented at a Japanese bank.The daily transactions were worth up to half a million dollars, with large blocks of sequentially numbered cheques being handed over. After prompting from US regulators, HBUS found out that the travelers’cheques were being bought in Russia – a country at high-risk of money laundering.”

A day before the HSBC fine, says another BBCstory, Standard Chartered [Bank was ordered to] pay more than $300million (£187million) to settle charges [that] it violated US sanctions on Iran, Burma, Libya and Sudan. The UK-based bank has been fined $100million by the Federal Reserve while it will also pay the Department of Justice $227 million, the regulators said.

The violations took place from 2001-2007 and the bank said it had changed its procedures since then.” Interestingly, “Standard Charteredhas already paid $340million to New York’s Department of Financial Services [DFS”] for other instances of financial impropriety. “The DFS had accused it of hiding 60,000 transactions with Iran worth $250billion over nearly a decade.”In total, Barclays has been fined about $670million over suspect payments.

Prompted by the HSBC and Standard Chartered cases, the BBC compiled a list of some cases of financial impropriety committed by multi-national banks in the last many years. According to the report the US Commodity Futures Trading Commission of the US, fined Barclays $200 million for manipulation of libor or the inter-bank lending rate, i.e., the rate at which banks lend money to each other. Also for the same offence, the US Department of Justice fined Barclays $160 million and the Financial Services of the UK also fined it $93 million.

All these violations are no different from what BCCI was accused of. Also it is clear that these acts and practices of impropriety are systematic and everyday events in the daily transactions of US/European banks. One is thus compelled to ask why IBCC was closed, while Standard Chartered and, especially, HSBC, are today getting away with simple fines?

IBCC-phobia in the West

According to Wikipedia: “IBCC was [in 1991] awaiting final approval for a restructuring plan in which it would have re-emerged as the ‘Oasis Bank’. However, after the Sandstorm report, regulators concluded BCCI was so fraught with problems that it had to be seized. It had already been ordered to shut down its American operations in March for its illegal control of First American [Bank.]

“On July 5, 1991, regulators persuaded a court in Luxembourg to order BCCI liquidated on the grounds that it was hopelessly insolvent. According to the court order, BCCI had lost more than its entire capital and reserves the year before. At 1:00P.M. London time that day (8:00A.M. in New York City), regulators in five countries marched into BCCI’s offices and shut them down. Around a million depositors were immediately affected by this action.

“On July 7, 1991, Hong Kong Office of the Commissioner of Banking (forerunner of the Hong Kong Monetary Authority) ordered BCCI to shut down its business in Hong Kong on the grounds that BCCI had problem loans and the Sheikh of Abu Dhabi, the major shareholder of BCCI, refused to provide funds to the Hong Kong BCCI. Hong Kong BCCI was liquidated on July 17, 1991.”

In its executive summary, the APFN also states that BCCI “developed a strategy to infiltrate the US banking system, which it successfully implemented despite regulatory barriers that were designed to keep it out.” It added that: “The flawed decision made by [US] regulators in the US which allowed the BCCI to secretly acquire US banks were caused in part by gaps in the regulatory process and in part by BCCI’s use of well-connected lawyers to help them through the process.”

On the foreclosure of IBCC, the regulators could claim BCCI had a bad reputation for a financial institution. Yet Barclays and Standard Chartered have engaged in major illegalities of colossal proportions and all the punishment they get are fines. Indeed, if we raise the size of IBCC scandal by the rate of dollar inflation from 1991 to 2012, it will come nowhere near the HSBC scandal. So why was HSBC not closed down?

It is, however, noteworthy that, asection of the US Treasury Department, “the Office of the Comptroller of the Currency (OCC,) was adamantly opposed to BCCI being allowed to buy its way into the American banking industry.

Also, “BCCI’s rapid growth alarmed the financial community, as well as regulators [in the EU and US...] BCCI [explained] that its growth was fuelled by the increasingly large number of deposits by oil-rich states who owned stock in the bank as well as by sovereign developing nations. [Western countries were so alarmed by its growth that...] the Bank of England, [for example,] ordered BCCI to cap its branch network in the United Kingdom at 45 branches.”