By Erin Drushel[avatar user=”ErinDrushel” size=”thumbnail” align=”left”]Erin Drushel[/avatar]
Over a week ago, the United States Senate Permanent Subcommittee on Investigations released a report on “anti-money laundering and terrorist financing vulnerabilities,” in which they examined the relationship between the global bank HSBC and its U.S. affiliate.
The Subcommittee’s findings brought to light lapsed controls and poor oversight of anti-money laundering (AML) procedures, which led to highly-questionable transactions. The report states that the U.S. affiliate disregarded possible terrorist links when providing correspondent accounts to some foreign banks. As defined by the report, correspondent accounts allow one financial institution “to move funds, exchange currencies, cash monetary instruments, or carry out other financial transactions” on behalf of another.
The report also says that the U.S. affiliate did not adhere to the stronger regulations that were enacted as part of the Patriot Act of 2002. In 2003, the bank proposed reforms to strengthen AML controls, but those proposals were not implemented. The problems persisted and grew while the situation continued to deteriorate.
Where is the national outrage?
This report doesn’t just identify another failure in consumerism. This is greater than the mortgage meltdown and the failing economy. This is a failure of national security, which is arguably the driving force of American domestic and foreign policy since the 9/11 terrorist attacks.
For all of the complaints about the Transportation Security Administration (TSA) and other alleged tramplings of individual rights, why aren’t more people aiming their anger at the source of the problems rather than at the attempted – albeit sometimes misguided – solutions?
The notion of banks being “too big to fail” is a prevalent and controversial one, but this is a case where the bank and its controls have failed – not in the traditional sense, as in the bank going under, but rather failing its consumers and country by not doing its due diligence.
HSBC made the list of global banks deemed “too big to fail.” So, how do you control them? How great is their responsibility to take the necessary steps to ensure safety and sound management? What prevents them from only paying lip-service to internal security procedures, knowing they will essentially be protected from too-rigorous enforcement because that could lead to a collapse?
If you’ve labelled a bank as “too big to fail,” what more punishment is there than giving it a slap on the wrist that merely results in a bureaucratic headache?
Too many questions and “ifs” – not enough answers.
There is a need to delicately balance working successfully in a global economy, while avoiding crippling protectionist policies that can harm economies and force them underground. There is also a need to balance national security over profits. In the case of the HSBC U.S. affiliate, they failed.
Is this a justifiable cost of doing business? If a free market must truly be free then, yes, this would be acceptable…but if such is the case, so too should it be that no one is “too big to fail.”
– Erin Drushel