The silence of the hyenas!

I think we are rapidly approaching the time when we will soon be inhabiting a parallel universe from the major high street banks. They are clearly living in another paradigm from the rest of us, where they have been encouraged to take leave of all sense of reality, a concerted retreat from sanity which allows them to pretend that their criminal actions in money laundering, PPI fraud, or LIBOR manipulations are really perfectly normal and in the normal course of doing business, and the real fault lies with the regulators and the politicians who insist on passing laws which as far as the banks are concerned, merely get in the way of their doing as much criminal business as they wish.

They have been behaving in this organised criminal fashion for so long, and in the process, making so much money, that they now believe that they are truly above the law which applies to mere mortals. They honestly have come to believe that they are the Masters of the Universe, the financial Jedi, and that ordinary laws passed by democratic processes do not impact upon them. How else can you explain the rash of shoddy articles suddenly appearing in all good Tory and City apologist papers, bemoaning and bewailing the unreasonable way in which the poor British banks are being treated.

Suddenly, the fact that they are openly and cynically breaking international laws, implemented through the exercise of the democratic function, is of no account. Engaging in a level of organised criminality which would have made Lucky Luciano proud, is what has come to be expected of them, it's what they do; an exercise in wholesale law breaking for which they express no sense of remorse, they refuse to be drawn on the admission of any sign that they regret their excesses, and instead, they call to their aid the PR men, the word-weasels, the petty scribblers and the traditional lickspittles and poltroons who champion their cause, to downplay their wrong-doings. When we might expect them to speak out and express contrition, all we get is corporate silence, the silence of the hyenas!

Recent stories in the Daily Telegraph point to the support of my thesis. Take the title from the edition of 6th November, "...America's self-aggrandising regulators are biggest risk to HSBC..."

Of course, silly me, why didn't I realise that it was not HSBC's criminality or greed that had dumped them in the shit, but some jumped-up, puffed-up American regulator, keen to put another notch on his gun!

I should have seen through the Americans' little game. These fines were not being levied against HSBC because they were operating like a rogue operation, moving ziga-gillions of dollars of drug money for the Mexican cartels, in complete disregard for every fucking anti-money laundering law and regulation in the world. No, they were imposed because in the words of one writer on the Daily Torygraph, "...myriad US regulators have now found a wonderfully self-aggrandising business model - namely targeting foreign banks and using the fines levied to launch fresh enquiries, ad infinitum..."

I wonder how this man manages to keep his lunch down sometimes! But wait on, there's more about these perfidious Americans. When talking about the criminal investigations which HSBC has been subject to, he complains;

"...But the chances of something amiss turning up tends to increase when you have four US federal agencies – the Department of Justice, the Federal Reserve, the Office of the Comptroller of the Currency and the Department of Treasury Financial Crimes Enforcement Network – all poking their noses in and ruminating on how big a fine they should levy. And that’s before a similar clutch of regulators at New York state level get involved assessing separate penalties for HSBC’s alleged failure to screen a Saudi Arabian bank, possibly linked to terrorists..."

I mean, what could be more unreasonable than an American law enforcement agency should bother to do the job they are created to do? That's what's so wrong with this world, you see, instead of behaving like decent British regulators and sticking their heads in the sand and ignoring the facts and pretending that nothing criminal has happened, because it has been carried out by the suits, and anyway you can always tell the public that there are no criminal offences which apply, no, the Americans actually have the temerity to do their job properly! I mean, is this unsporting of them, or what?

And it's not just HSBC the writer seems to have a crush on either. He wants to apologise for Standard Chartered, another bank which after years of wrangling about how many crimes it was going to admit to, finally wound up with a nasty reminder of the Americans' powers when it comes to hitting rogue banks where it hurts. 

"...But, as rival Standard Chartered has also shown, the biggest risks do not come with banking in far-flung places – but in dealing with US regulators alert to any consequent money-flows through banks’ American subsidiaries..."

You see, those damned regulators again, sticking their noses in where Standard Chartered would have preferred them not to go! Let us remind ourselves that Standard Chartered were not investigated for banking in far-flung places. They were investigated and fined for routinely ignoring and flouting US rules on sanctions and in particular with Iran, and thus laundering vast sums of money through the US banking system. 

I keep on telling banks, laundering money through the New York Bank Clearing system will get you in deep shit with the US authorities. If you don't want to run this risk, don't do business in dollars and don't flout US sanctions! It's their jurisdiction, it's their currency, it's their rules, it's their game, so don't fuck about with them! 

When discussing how apparently easy it is to fine banks in America, the writer says of HSBC's new business line in Mexico of 26 million new potential clients, described by HSBC as a 'demographic bonus', he says;


"...That should go down well with the American authorities. HSBC has just made another $800m (£500m) of provisions on top of the $700m in the previous quarter – largely for the bank's failure to spot how many of its exciting sombrero-clad clients had links to Tijuana’s money-laundering fraternity. For the regulators, it looks like easy pickings..."



Spot the satirical irony here. Oh poor HSBC, regardless of the global legal requirement to 'Know Your Customer' and apply enhanced due diligence in High Risk countries, their '...exciting sombrero-clad clients...' insisted on bamboozling them into dealing for money launderers. Here's a world leading bank with experience in over 70 countries, but they want us to believe that they could get turned over by a bunch of peons in big hats! You couldn't make this crap up! Does anyone in HSBC work in the risk management practice?

Actually, that's what always makes me laugh about banks like HSBC, Barclays, Lloyds, Standard Chartered, et al, how they make such a big issue about their ability to 'manage risk'. 

When I used to work at a major IT provider in the late 1990s, we were always being told how efficient the big banks were at managing risk, and how they spent serious sums of money on hiring those people who could bring new designs of risk management tools and solutions to their stable. Well, they obviously weren't that good!

Another writer for the Telegraph in a piece entitled "...We're a British Bank, get us out of here..."  points out a very interesting side-light on the scandals around bank crimes. Apparently the British regulators have been upset by the scale of the financial penalties imposed on major UK banks and have privately expressed their fury at the way the US authorities seem to have singled out this country's lenders for punishment.

It's not as if they were concerned about the fact that British banks were breaking US laws, or flouting international standards, or riding roughshod over global conventions to which the UK is a signatory. They too apparently subscribed to the view that this was some kind of commercial attack on UK interests as opposed to the reality that the size of these fines and the way in which the investigations were moving at pace just made the UK regulators look silly and amateurish in the way they deal with the problems, and in comparison to their US counterparts?

However, even the anger at their US counterparts, it appears is tempered by a sense of disbelief at the way several major high street banks naively wandered into the American market and operated their businesses in such a way as to leave them facing such large fines. As managers in other industries have learnt to their cost, you ignore the highly politicised nature of American corporate justice at your peril.

Excuse me, Mr British banker, why on earth go to New York and take such chances, when you could have stayed here in Britain and got away with murder. You've been getting away with it here for years so why try and change the model now? Were you so naive, so arrogant, that you thought the Americans would let you get away with the kind of criminality you have traditionally been excused in the UK?

This is fascinating stuff. Let me make sure I understand this. The British regulators, the FSA (and presumably at this time the Bank of England) have been exercised by the way British banks have sought to commit the sort of crimes in America for which they have been disciplined and hugely fined, but which had they been committed in the UK, would have probably been called by some benignly misleading name such as 'mis-selling', or even better, probably ignored for as long as possible. The commentator continues;

"...For executives at British banks the post-millennial scramble into the US market has been replaced by a headlong charge for the exit. HSBC has rapidly pared back its operations in the country and is on course to completely exit the US retail business. RBS is facing increasing pressure to sell up, too, though its managers are reluctant to crystallise the loss any sale is likely to require..." 

Not surprising really, can't be much fun trying to run your bank on the British High Street model where the customers are led as lambs to the ritual slaughter for every new wheeze, scam, fiddle, and fraud the banks can dream up as new products, when you have a regulatory atmosphere that wants to throw the book at you every time they find you on the take?

The Daily Telegraph continues its anti-US rhetoric; "...It will be understandable if the current attack on British banks by the US authorities continue their rapid retrenchment..." 

For the life of me I cannot understand why simply because they want to do the jobs they are paid to do, the Americans should be subject to this kind of pillorying by a national newspaper which should know it is giving tacit support to every organised criminal act of which the British Banking sector is capable. Perhaps they don't care anymore, perhaps they never really cared, perhaps they were always prepared to turn a blind eye as long as their monied friends in the suits were making money of whatever kind or colour?

As I said, this was all about the management of risk, for which the British banking sector has always believed it has a genius (to paraphrase Professor Jim Gower!) The debate on risk management used to be loud and long, but no-one ever thought to incorporate regulatory risk into the model!

I used to try and make a contribution to this debate by seeking to devise a software product and procedures which would help these banks identify specific US-centric risks which could be of real danger to them. As a lawyer, I was only too well aware of the issues of US extraterritoriality, and how the US justice authorities conducted their investigations and prosecuted the crimes they discovered.

I was aware also of the plea-bargaining mechanisms they adopted to encourage recalcitrant criminals to agree to plead guilty. I tried, vainly to encourage the big banks to see US market regulatory standards and procedures as a primary risk issue which needed to be managed, and I tried to get them to understand how to implement systems and controls to minimise those risks. All they did was laugh at me and say it wasn't an issue for them! 

So, now I sit back and watch all these cases and think how much they could have saved themselves if they hadn't been so arrogant. Pay up boys and look good about it and stop whingeing, 'cos you had your opportunity and you blew it!