Let them have at it
For all the hoopla over two big British banks agreeing to substantial fines for financially aiding enemies of the United States, they are getting off cheaply.
Tuesday, British banking giant HSBC agreed to pay $1.9 billion for laundering at least $881 million in Mexican drug cartel money, in direct violation of the Bank Secrecy Act. The Justice Department also alleges that HSBC intentionally conducted illegal transactions with Iran, Libya, Sudan, Burma and Cuba, in violation of the Trading with the Enemy Act.
Monday, Standard Chartered PLC, another big British Bank, signed an agreement with New York bank regulators to pay $340 million for its illegal dealings with Iran.
The penalties are large in terms of precedent and in terms of raw dollars. But analyst Gary Greenwood of Shore Capital told the Associated Press that the penalties, for each bank, amount to about 9 percent of their pre-tax profits for 2012. In other words, the fines easily are absorbable.
Stuart Gulliver, HSBC chief executive, apologized and said: "We accept responsibility for our past mistakes."
The problem, of course, is that the bank's egregious conduct was not a "mistake." The mistake was getting caught.
Within the Justice Department, there reportedly was a long and heated debate over whether the government should agree to a non-criminal settlement.
The law itself should settle that issue. Deterrence is supposed to be the objective. Going forward, the rules should be simple: any foreign bank found to have aided enemies of the United States will have their U.S. charters revoked. If banks like Standard Chartered and HSBC want to cast their lots with the likes of Iran and Mexican drug lords, instead of abiding by the clear rules of the world's largest economy, let them have at it.