DOJ Urges Federal Court to Approve Sweetheart Deal with Drug-Tainted HSBC

You can get much farther with a kind word and a gun than you can with a kind word alone. -- Al Capone

In Reckless Endangerment, a lively exposé of the frauds at the heart of the subprime meltdown, journalists Gretchen Morgenson and Joshua Rosner wrote that if "mortgage originators like NovaStar or Countrywide were the equivalent of drug pushers hanging around a schoolyard and the ratings agencies were the narcotics cops looking the other way, brokerage firms providing capital to the anything-goes lenders were the overseers of the cartel."

Their observations are all the more relevant given the outrageous behavior by major banks which polluted an already terminally corrupt financial system with blood-spattered cash siphoned-off from the global drug trade.

It wouldn't be much of a stretch to insist that drug money laundered by financial giants like HSBC and Wachovia were in fact, little more than "hedges" designed to offset losses in residential mortgage backed securities (RMBS), sliced and diced into toxic collateralized debt obligations, as the 2007-2008 global economic crisis cratered the capitalist "free market."

And like Wachovia's ill-fated $25.5 billion (£16.96bn) buy-out of Golden West Financial/World Savings Bank at the top of the market in 2006, HSBC's 2002 purchase of Household International and its mortgage unit, Household Finance Corporation for the then princely sum of $15.2 billion (£10.02bn) also proved to be a proverbial deal too far.

Evidence suggests that HSBC stepped up money laundering for their cartel clients as the hyperinflated real estate bubble collapsed. Along with other self-styled masters of the universe who were bleeding cash faster than you can say credit default swaps, HSBC posted 2008 projected first quarter losses of "$17.2 billion (£8.7bn) after the decline in the US housing market hit the value of its loans," BBC News reported.

From there RMBS deficits skyrocketed. By 2010, as Senate and Justice Department investigators were taking a hard look at bank shenanigans, Reuters reported that HSBC Holdings was "working off $20 billion [£13.19bn] worth of loans per year in its US Household Finance Corp. unit" where "liabilities stood at about $70 billion [£46.17bn]."

However you slice today's epidemic of financial corruption, a trend already clear two decades ago when economists George Akerlof and Paul Romer published their seminal paper, Looting: The Economic Underworld of Bankruptcy for Profit, incentives were huge as senior bank executives inflated their balance sheets with "criminal proceeds ... likely to have amounted to some 3.6 per cent of GDP (2.3-5.5 per cent) or around US$2.1 trillion in 2009," according to a 2011 estimate by the United Nations Office on Drugs and Crime (UNODC).

To make matters worse, willful criminality at the apex of the financial pyramid was aided and abetted by the US Justice Department and the federal regulatory apparatus who allowed these storied economic predators to walk.

'Change' that Banksters Can Believe In

In late January, Bloomberg News reported that US prosecutors have "asked a federal judge to sign off on HSBC Holdings Plc (HSBA)'s $1.9 billion [£1.2bn] settlement of charges it enabled drug cartels to launder millions of dollars in trafficking proceeds."

Prosecutors justified the settlement on grounds that "it includes the largest-ever forfeiture in the prosecution of a bank and provides for monitoring to prevent future violations," arguing that "strict conditions, and the unprecedented forfeiture and penalties imposed, serve as a significant deterrent against future similar conduct."

Let's get this sick joke straight: here's a bank that laundered billions of dollars for Colombian and Mexican drug lords, admittedly amongst the most violent gangsters on earth (120,000 dead Mexicans and counting since 2006) and we're supposed to take this deal seriously. Seriously? Remember, this an institution whose pretax 2012 profits will exceed $23.5 billion (£15.63bn) when earnings are reported next week and the best the US government can do is extract a promise to "do better"--next time.

That deal, a deferred prosecution agreement (DPA) was cobbled together between the outgoing head of the Justice Department's Criminal Division, Lanny A. Breuer and HSBC, Europe's largest bank. At the urging of former Treasury Secretary Timothy Geithner, no criminal charges were sought--or brought--against senior bank executives.

Why might that be the case?

During a press conference trumpeting the government's "shitty deal," Breuer breezily declared that DOJ's decision not to move forcefully against HSBC was in everyone's best interest: "Had the US authorities decided to press criminal charges, HSBC would almost certainly have lost its banking license in the US, the future of the institution would have been under threat and the entire banking system would have been destabilized."

As if allowing drug-connected money launderers license to pollute one of the world's largest financial institutions hadn't already "destabilized" the banking system!

Although Obama's Justice Department smeared "lipstick" on this pig of a deal, their own "Statement of Facts" submitted to US District Judge John Gleeson paints a damning picture of criminal negligence that crossed the line into outright collusion with their Cartel clients:

From 2006 to 2010, HSBC Bank USA violated the BSA and its implementing regulations. Specifically, HSBC Bank USA ignored the money laundering risks associated with doing business with certain Mexican customers and failed to implement a BSA/AML program that was adequate to monitor suspicious transactions from Mexico. At the same time, Grupo Financiero HSBC, S.A. de C.V. ("HSBC Mexico"), one of HSBC Bank USA's largest Mexican customers, had its own significant AML problems. As a result of these concurrent AML failures, at least $881 million in drug trafficking proceeds, including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia, were laundered through HSBC Bank USA without being detected. HSBC Group was aware of the significant AML compliance problems at HSBC Mexico, yet did not inform HSBC Bank USA of these problems and their potential impact on HSBC Bank USA's AML program.

As with Wachovia, oceans of cash generated through drug trafficking were laundered by HSBC via the Black Market Peso Exchange (BMPE), a nexus of interconnected firms controlled by Colombian and Mexican drug cartels.

According to the DPA, "peso brokers purchase bulk cash in United States dollars from drug cartels at a discounted rate, in return for Colombian pesos that belong to Colombian businessmen. The peso brokers then use the US dollars to purchase legitimate goods from businesses in the United States and other foreign countries, on behalf of the Colombian businessmen. These goods are then sent to the Colombian businessmen, who sell the goods for Colombian pesos to recoup their original investment."

"In the end," the Justice Department informed us, "the Colombian businessmen obtain US dollars at a lower exchange rate than otherwise available in Colombia, the Colombian cartel leaders receive Colombian pesos while avoiding the costs associated with depositing US dollars directly into Colombian financial institutions, and the peso brokers receive fees for their services as middlemen."

Got that? And it wasn't only plasma TVs, diamond-studded Rolexes or armored-up SUVs that cartel heavies were buying from enterprising businessmen on this side of the border. Add to their list of must-haves: fleets of airplanes and enough weapons to equip an army!

DOJ investigators discovered that "drug traffickers were depositing hundreds of thousands of dollars in bulk US currency each day into HSBC Mexico accounts. In order to efficiently move this volume of cash through the teller windows at HSBC Mexico branches, drug traffickers designed specially shaped boxes that fit the precise dimensions of the teller windows. The drug traffickers would send numerous boxes filled with cash through the teller windows for deposit into HSBC Mexico accounts. After the cash was deposited in the accounts, peso brokers then wire transferred the US dollars to various exporters located in New York City and other locations throughout the United States to purchase goods for Colombian businesses. The US exporters then sent the goods directly to the businesses in Colombia."

The investigation further revealed that "because of its lax AML controls, HSBC Mexico was the preferred financial institution for drug cartels and money launderers. The drug trafficking proceeds (in physical US dollars) deposited at HSBC Mexico as part of the BMPE were sold to HSBC Bank USA through Banknotes."

What's the "get" for the bank? Former Senate investigator Jack Blum told Rolling Stone's Matt Taibbi: "If you have clients who are interested in 'specialty services'­--that's the euphemism for the bad stuff--you can charge 'em whatever you want." Blum said "the margin on laundered money for years has been roughly 20 percent."

How's that for an incentive!

'Big Audits, Big Problems. No Audits, No Problems'

In cobbling together the HSBC deal, the Justice Department ignored Senate testimony by whistleblowers, some of whom were fired or eventually resigned in disgust when higher-ups thwarted their efforts to get a handle on AML "lapses" by the North American branch during a critical period when it was becoming clear that losses in the subprime market would be huge.

We were informed that senior level officials at HBUS were keep in the dark about the extent of problems plaguing HBMX by HSBC Group (London) executives, "including the CEO, Head of Compliance, Head of Audit, and Head of Legal," all of whom were aware "that the problems at HSBC Mexico involved US dollars and US dollar accounts."

We're supposed to believe that Canary Wharf "did not contact their counterparts at HSBC Bank USA to explain the significance of the problems or the potential effect on HSBC Bank USA's business." This fairy tale is further enlarged upon when we're informed that "HSBC North America's General Counsel/Regional Compliance Officer first learned of the problems at HSBC Mexico and their potential impact on HSBC Bank USA in 2010 as a result of this investigation."

According to the suspect narrative concocted by government prosecutors, HBUS's General Counsel was informed by HSBC Group Compliance Chief, David Bagley, that she wasn't told about "potential problems" at HBMX because the bank doesn't "air the dirty linen of one affiliate with another . . . we go in and fix the problems."

Really?

Keep in mind that the Office of the Comptroller of the Currency had issued not one, but two toothless cease-and-desist orders between 2003 and 2010 ordering HSBC to clean up their act, all of which revolved around strengthening anti-money laundering controls which were promptly ignored.

But as the US Senate Permanent Subcommittee on Investigations revealed in their 335-page report (large PDF file) and related hearings last summer, despite the fact that "Compliance and AML staffing levels were kept low for many years as part of a cost cutting measure," Senate investigators learned through HSBC internal correspondence that those charged with monitoring suspicious transactions were "struggling to 'handle the growing monitoring requirements' associated with the bank's correspondent banking and cash management programs, and requested additional staff."

"Despite requests for additional AML staffing," the Senate reported that "HBUS decided to hold staff levels to a flat headcount."

"After being turned down for additional staff, Carolyn Wind, longtime HBUS Compliance head and AML director, raised the issue of inadequate resources with the HNAH board of directors. A month after the board meeting, after seven years as HBUS' Compliance head Ms. Wind was fired," Senate investigators disclosed.

Wind, who had met with HNAH's board in October 2007 to discuss staffing, was reprimanded by her supervisor, Regional Compliance Officer and Senior Executive Vice President Janet L. Burak, for raising the issue. In an email to disgraced Group Compliance chief David Bagley, who dramatically resigned on camera during those Senate hearings, Burak "expressed displeasure" with Wind and told Bagley:

"I indicated to her my strong concerns about her ability to do the job I need her to do, particularly in light of the comments made by her at yesterday's audit committee meeting .... I noted that her comments caused inappropriate concern with the committee around: our willingness to pay as necessary to staff critical compliance functions (specifically embassy banking AML support), and the position of the OCC with respect to the merger of AML and general Compliance."

In marked contrast to the government's version, it appears that HBUS had been fully apprised of "cash management" problems three years earlier than claimed in the DPA, yet senior level executives choose to look the other way--so long as the cash keep flowing.

Burak's firing of Wind should have raised eyebrows at the Justice Department. As Regional Legal Department Head for North America, Burak was appointed by the HNAH board to serve as the bank's Regional Compliance Officer, a move which was even criticized by Bagley, but he was overruled by his Canary Wharf masters.

Her appointment as Regional Compliance Officer shouldn't come as a surprise however, considering that before joining the HSBC team, Burak "was group general counsel, Household International . . . as well as for Household's federal regulatory coordination and compliance function," according to a 2004 BusinessWire profile. And with the bank on the hook for some $70 billion (£46.17bn) and counting in toxic Household International mortgage liabilities, her choice by London to supervise AML operations was a slam dunk.

In her new dual-hatted role, Burak was taken to the woodshed by both the Office of the Comptroller of the Currency and the Federal Reserve "for her lack of understanding of AML risks or controls" according to the Senate report. Indeed, OCC stated that Burak had "not regularly attended key committee or compliance department meetings" and had failed to keep herself and other bank executives "fully informed about issues and risks within the BSA/AML compliance program."

But if the task at hand was to keep AML staff to a "flat headcount" and not make waves with pesky audits that might force compliance with trivial matters such as legal requirements under the Bank Secrecy Act, well you get the picture! Senate investigators learned however, that BSA compliance issues were legion and what they found was just a tad troubling:

The identified problems included a once massive backlog of over 17,000 alerts identifying possible suspicious activity that had yet to be reviewed; ineffective methods for identifying suspicious activity; a failure to file timely Suspicious Activity Reports with U.S. law enforcement; a failure to conduct any due diligence to assess the risks of HSBC affiliates before opening correspondent accounts for them; a 3-year failure by HBUS, from mid-2006 to mid-2009, to conduct any AML monitoring of $15 billion [£9.53bn] in bulk cash transactions with those same HSBC affiliates, despite the risks associated with large cash transactions; poor procedures for assigning country and client risk ratings; a failure to monitor $60 trillion [£38.14tn] in annual wire transfer activity by customers domiciled in countries rated by HBUS as lower risk; inadequate and unqualified AML staffing; inadequate AML resources; and AML leadership problems.

But wait, there's more!

After Wind's dismissal, the HNAH board hired Lesley Midzain to fill the posts of Compliance head and AML director. But as Senate investigators revealed, "Ms. Midzain had no professional experience and little familiarity with US AML laws." Indeed, in December 2008 "HNAH's regulator, the Federal Reserve, provided a negative critique of Ms. Midzain's management of the bank's AML program."

According to Senate staff, the Federal Reserve complained that "Ms. Midzain did 'not possess the technical knowledge or industry experience to continue as the BSA/AML officer'." It noted that she "was interviewed by OCC examiners from another team and they supported the conclusion of the OCC resident staff that Midzain's knowledge and experience with BSA/AML risk is not commensurate to HNAH's BSA/AML high risk profile, especially when compared to other large national banks."

As a result of these rather pointed criticisms, Midzain was removed from the AML post and HBUS hired a new director, Wyndham Clark, a former US Treasury official. According to the Senate report, Clark "was required to report to Curt Cunningham, an HBUS Compliance official who freely admitted having no AML expertise, and through him to Ms. Midzain, whom the OCC had also found to lack AML expertise."

Call it a small world.

It soon became clear to Clark that although the bank had an "extremely high risk business model from AML perspective," as director he was "granted only limited authority to the AML director to remedy problems." According to a memorandum sent by Clark to his boss Curt Cunningham, he complained that "AML Director has the responsibility for AML compliance, but very little control over its success."

If one were a "conspiracy buff" one might even argue this was precisely as intended.

Senate investigators revealed that as he continued his work, "Clark grew increasingly concerned that the bank was not effectively addressing its AML problems. In February 2010, Mr. Clark met with the Audit Committee of the HNAH board of directors and informed the committee that he had never seen a bank with as high of an AML risk profile as HBUS."

In May 2010, he wrote to a more senior compliance officer: "With every passing day I become more concerned...if that's even possible."

Less than a year after taking the thankless job, in July 2010 Clark quit. He wrote HSBC Group Compliance chief David Bagley that he had neither the authority nor the support from senior managers needed to do his job. He told Bagley in no uncertain terms:

[T]he bank has not provided me the proper authority or reporting structure that is necessary for the responsibility and liability that this position holds, thereby impairing my ability to direct and manage the AML program effectively. This has resulted in most of the critical decisions in Compliance and AML being made by senior Management who have minimal expertise in compliance, AML or our regulatory environment, or for that matter, knowledge of the bank (HBUS) where most of our AML risk resides. Until we appoint senior compliance management that have the requisite knowledge and skills in these areas, reduce our current reliance on consultants to fill our knowledge gap, and provide the AML Director appropriate authority, we will continue to have limited credibility with the regulators.

According to the DPA, despite the risks associated with HSBC's highly-profitable Banknotes business, used and abused by all manner of shady customers, "from 2006 to 2009, Banknotes' AML compliance consisted of one, or at times two, compliance officers."

In 2006, the Treasury Department's Financial Crimes Enforcement Network (FinCEN) issued an Advisory warning that "US law enforcement has observed a dramatic increase in the smuggling of bulk cash proceeds from the sale of narcotics and other criminal activities from the United States into Mexico. Once the US currency is in Mexico, numerous layered transactions may be used to disguise its origins, after which it may be returned directly to the United States or further transshipped to or through other jurisdictions."

What was HSBC's response? The Justice Department informed us that despite the FinCEN notification "Banknotes stopped regular monthly monitoring of transactions for HSBC Group Affiliates, including HSBC Mexico, in July 2006."

And despite multiple notifications from government regulators, the bank accelerated their shady purchases: "Banknotes purchased approximately $7 billion [£4.51bn] in US currency from Mexico each year, with nearly half of that amount supplied by HSBC Mexico. From July 2006 to December 2008, Banknotes purchased over $9.4 [£6.06bn] billion in physical US dollars from HSBC Mexico, including over $4.1 billion [£2.64bn] in 2008 alone."

As a result of these rather willful "lapses" by senior executives, the Justice Department's "Statement of Facts" cited HSBC's,

a. Failure to obtain or maintain due diligence or KYC information on HSBC Group Affiliates, including HSBC Mexico; b. Failure to adequately monitor over $200 trillion [£126.9tn] in wire transfers between 2006 and 2009 from customers located in countries that HSBC Bank USA classified as "standard" or "medium" risk, including over $670 billion [£425.1bn] in wire transfers from HSBC Mexico; c. Failure to adequately monitor billions of dollars in purchases of physical US dollars ("banknotes") between July 2006 and July 2009 from HSBC Group Affiliates, including over $9.4 billion [£5.96bn] from HSBC Mexico; and d. Failure to provide adequate staffing and other resources to maintain an effective AML program.

Yet in the face of evidence that laundering drug money was anything but a mistake, Judge Gleeson was told that DOJ's decision not to criminally prosecute senior HSBC executives was predicated on the fiction that the $1.9 billion settlement's "strict conditions, and the unprecedented forfeiture and penalties imposed, [will] serve as a significant deterrent against future similar conduct."

Never mind the lack of evidence that DPA's are a "deterrent" to financial crimes. Indeed, a 2009 study by the US Government Accountability Office (GAO) concluded "that the Department of Justice (DOJ) lacked performance measures to assess how Deferred Prosecution Agreements (DPA) and Non-Prosecution Agreements (NPA) contribute to its efforts to combat corporate crime."

Well, if the Justice Department lacked "metrics" as to whether or not their agreements with corporate criminals act as a deterrent to future crimes, were there other considerations behind the sweetheart deals forged between the Criminal Division, HSBC and other banks?

You bet there were and it's worth recalling statements by former UNODC director Antonio Maria Costa in this regard. In 2009, Costa told The Observer that "he has seen evidence that the proceeds of organised crime were 'the only liquid investment capital' available to some banks on the brink of collapse last year. He said that a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."

Costa said that "in many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor."

"Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities... There were signs that some banks were rescued that way." Although Costa declined to identify the banks involved because it would not be "appropriate," he told The Observer that "money is now a part of the official system and had been effectively laundered."

"That was the moment [last year] when the system was basically paralysed because of the unwillingness of banks to lend money to one another," Costa averred. "The progressive liquidisation to the system and the progressive improvement by some banks of their share values [has meant that] the problem [of illegal money] has become much less serious than it was."

In other words, as illegal cash propped up the banks while the crisis was being sorted out, at the expense of the working class mind you, the financial pirates responsible for the capitalist meltdown have become even larger, thanks to taxpayer bailouts, in effect holding the economy hostage as they became "too big" to either "fail or jail."

As Matt Taibbi observed in Rolling Stone, "At HSBC, the bank did more than avert its eyes to a few shady transactions. It repeatedly defied government orders as it made a conscious, years-long effort to completely stop discriminating between illegitimate and legitimate money. And when it somehow talked the U.S. government into crafting a settlement over these offenses with the lunatic aim of preserving the bank's license, it succeeded, finally, in making crime mainstream."

What we are dealing with here is nothing less than a perverse economic system thoroughly criminalized by its elites; a bizarro world as Michel Chossudovsky pointed out where "war criminals legitimately occupy positions of authority, which enable them to decide 'who are the criminals', when in fact they are the criminals."

HSBC: Impunity of the Oligarchs

In another shameful decision by the US Department of Justice, earlier this month federal prosecutors reached a deferred prosecution agreement (DPA) with UK banking giant HSBC, Europe's largest bank.

Shameful perhaps, but entirely predictable. After all, in an era characterized by economic collapse owing to gross criminality by leading financial actors, policy decisions and the legal environment framing those decisions have been shaped by oligarchs who quite literally have "captured" the state.

Founded in 1865 by flush-with-cash opium merchants after the British Crown seized Hong Kong from China in the aftermath of the First Opium War, HSBC has been a permanent fixture on the radar of US law enforcement and regulatory agencies for more than a decade.

Not that anything so trifling as terrorist financing or global narcotrafficking mattered much to the Obama administration.

As I previously reported, (here, here, here and here), when the Senate Permanent Subcommittee on Investigations issued their mammoth 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals, to the tune of hundreds of billions of dollars, with financial entities with ties to international terrorism and the grisly drug trade.

Charged with multiple violations of the Bank Secrecy Act for their role in laundering blood money for Mexican and Colombian drug cartels, as a sideline HSBC's Canary Wharf masters conducted a highly profitable business with the financiers of the 9/11 attacks who washed funds through Saudi Arabia's Al Rajhi Bank into accounts controlled by whomever controlled the hijackers.

While the media breathlessly reported that the DPA will levy fines totaling some $1.92 billion (£1.2bn) which includes $655 million (£408m) in civil penalties, the largest penalty of its kind ever levied against a bank, under terms of the agreement not a single senior officer will be criminally charged. In fact, those fines will be paid by shareholders which include municipal investors, pension funds and the public at large.

With some 7,200 offices in more than 80 countries and 2011 profits topping $22 billion (£13.6bn), Senate investigators found that HSBC's web of 1,200 correspondent banks provided drug traffickers, other organized crime groups and terrorists with "U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions. Correspondent banking can become a major conduit for illicit money flows unless U.S. laws to prevent money laundering are followed." They weren't and as a result the bank's balance sheets were inflated with illicit proceeds from terrorists and drug gangsters.

Revelations of widespread institutional criminality are hardly a recent phenomenon. More than a decade ago journalist Stephen Bender published a Z Magazine piece which found that "99.9 percent of the laundered criminal money that is presented for deposit in the United States gets comfortably into secure accounts."

According to Bender: "The key institution in the enabling of money laundering is the 'private bank,' a subdivision of every major US financial institution. Private banks exclusively seek out a wealthy clientele, the threshold often being an annual income in excess of $1 million. With the prerogatives of wealth comes a certain regulatory deference."

Such "regulatory deference" in the era of "too big to fail" and its corollary, "too big to prosecute," is a signal characteristic as noted above, of state capture by criminal financial elites.

Indeed, HSBC's private banking arm, HSBC Private Bank is the principal private banking business of the HSBC Group. A holding company wholly owned by HSBC Bank Plc, its subsidiaries include HSBC Private Bank (Suisse) SA, HSBC Private Bank (UK) Limited, HSBC Private Bank (CI) Limited, HSBC Private Bank (Luxembourg) SA, HSBC Private Bank (Monaco) SA and HSBC Financial Services (Cayman) Limited. All of these entities featured prominently in money laundering and tax evasion schemes uncovered by the Senate Permanent Subcommittee in their report. Combined client assets have been estimated by regulators to top $352 billion (£217.68).

According to Senate investigators, HSBC Financial Services (Cayman) was the principle conduit through which drug money laundered through HSBC Mexico (HBMX) flowed. "This branch," Senate staff averred, "is a shell operation with no physical presence in the Caymans, and is managed by HBMX personnel in Mexico City who allow Cayman accounts to be opened by any HBMX branch across Mexico."

"Total assets in the Cayman accounts peaked at $2.1 billion in 2008. Internal documents show that the Cayman accounts had operated for years with deficient AML [anti-money laundering] and KYC [know your client] controls and information. An estimated 15% of the accounts had no KYC information at all, which meant that HBMX had no idea who was behind them, while other accounts were, in the words of one HBMX compliance officer, misused by 'organized crime'."

In fact, the "normal" business model employed by HSBC and other entities bailed out by Western governments fully conform to the "control fraud" model first described by financial crime expert William K. Black.

According to Black, a control fraud occurs when a CEO and other senior managers remove checks and balances that prevent criminal behaviors, thus subverting regulatory requirements that prevent things like money laundering, shortfalls due to bad investments or the sale of toxic financial instruments.

In The Best Way to Rob a Bank Is to Own One, Black informed us: "A control fraud is a company run by a criminal who uses it as a weapon and shield to defraud others and makes it difficult to detect and punish the fraud."

"Control frauds," Black reported, "are financial superpredators that cause vastly larger losses than blue-collar thieves. They cause catastrophic business failures. Control frauds can occur in waves that imperil the general economy. The savings and loan (S&L;) debacle was one such wave."

Indeed, "control frauds" like HSBC "create a 'fraud friendly' corporate culture by hiring yes-men. They combine excessive pay, ego strokes (e.g., calling the employees 'geniuses') and terror to get employees who will not cross the CEO." In such a "criminogenic" environment, the CEO (paging Lord Green!) "optimizes the firm as a fraud vehicle and can optimize the regulatory environment."

In their press release, the Department of Justice announced that HSBC Group "have agreed to forfeit $1.256 billion and enter into a deferred prosecution agreement with the Justice Department for HSBC's violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA)."

"According to court documents," the DOJ's Office of Public Affairs informed us, "HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders."

The DOJ goes on to state, "A four-count felony criminal information was filed today in federal court in the Eastern District of New York charging HSBC with willfully failing to maintain an effective anti-money laundering (AML) program, willfully failing to conduct due diligence on its foreign correspondent affiliates, violating IEEPA and violating TWEA."

However, "HSBC has waived federal indictment, agreed to the filing of the information, and has accepted responsibility for its criminal conduct and that of its employees."

In other words, because they accepted "responsibility" for acts that would land the average citizen in the slammer for decades, those guilty of "palling around with terrorists" or smoothing the way as billionaire drug traffickers hid their loot in the so-called "legitimate economy," got a free pass. In fact, under terms of the agreement DOJ's "deferred prosecution" will be "deferred" alright, like forever!

Why might that be the case?

The New York Times informed us that state and federal officials, eager beavers when it comes to protecting the integrity of a system lacking all integrity, "decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world's largest banks and ultimately destabilize the global financial system."

Keep in mind this is a "system" which former United Nations Office of Drugs and Crime director Antonio Maria Costa told The Observer thrives on illicit money flows. In 2009, Costa told the London broadsheet that "in many instances, the money from drugs was the only liquid investment capital. In the second half of 2008, liquidity was the banking system's main problem and hence liquid capital became an important factor." Costa said that "a majority of the $352bn (£216bn) of drugs profits was absorbed into the economic system as a result."

Glossing over these facts, Times' stenographers Ben Protess and Jessica Silver-Greenberg, cautioned that "four years after the failure of Lehman Brothers nearly toppled the financial system," federal regulators "are still wary that a single institution could undermine the recovery of the industry and the economy."

"Given the extent of the evidence against HSBC, some prosecutors saw the charge as a healthy compromise between a settlement and a harsher money-laundering indictment. While the charge would most likely tarnish the bank's reputation, some officials argued that it would not set off a series of devastating consequences."

Devastating to whom one might ask? The 100,000 Mexicans brutally murdered by drug gangsters, corrupt police and Mexican Army soldiers whose scorched-earth campaign kills off the competition on behalf of Mexico's largest narcotics organization, the Sinaloa Cartel run by fugitive billionaire drug lord Chapo Guzmán?

"A money-laundering indictment, or a guilty plea over such charges," the Times averred, "would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States, officials said."

Many of the same lame excuses for prosecutorial inaction were also prominent features in the British press.

The Daily Telegraph reported that the "largest banks have become too big to prosecute because of the impact criminal charges would have on confidence in them, Britain's most senior bank regulator has admitted."

"In a variant of the 'too big to fail' problem, Andrew Bailey, chief executive designate of the Prudential Regulation Authority, said bringing a legal action against a major financial institution raised 'very difficult questions'."

"'Because of the confidence issue with banks, a major criminal indictment, which we haven't seen and I'm not saying we are going to see… this is not an ordinary criminal indictment'," Bailey told the Telegraph.

Echoing Bailey, Assistant Attorney General Lanny Breuer said the decision not to prosecute HSBC was made because "in this day and age we have to evaluate that innocent people will face very big consequences if you make a decision."

This from an administration that continues to prosecute--and jail--low-level drug offenders at record rates!

"Breuer's argument is facially absurd," according to William K. Black. In a piece published by New Economic Perspectives, Black argues:

Prosecuting HSBC's fraudulent controlling managers would not harm anyone innocent other than their families--and virtually all prosecutions hurt some family members. Breuer claims that virtually all of HSBC's senior officers have been removed, so his argument is doubly absurd. Mostly, however, Breuer ignores all of the innocents harmed by the control frauds. SDIs [systemically dangerous institutions] that are control frauds are weapons of mass economic destruction that drive global crises and are the greatest enemy of 'free' markets. They are also the greatest threat to democracy, for they create crony capitalism. We are all innocent victims of these control frauds--and the Obama and Cameron governments are allowing them to commit their frauds with impunity from criminal prosecutions. The controlling officers get wealthy without fear of prosecution. The SDIs controlled by fraudulent officers have to purchase an indulgence, but the price of the indulgence is capped by the 'too big to prosecute' doctrine at a level that will not cause it any real distress. Breuer's and Bailey's embrace of too big to prosecute should have led to their immediate dismissals. Obama and Cameron should either fire them or announce that they stand with the criminal enterprises and their fraudulent controlling officers against their citizens.

As Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed on his web site, "When you get a bank which admits, like HSBC has just done, that it is nothing more than a low-life money launderer for Mexican drug kingpins, and when it serves powerful vested interests to get round internationally-ratified sanctions against rogue nations, what possible benefit is achieved by trying to pretend that they cannot be prosecuted and charged with criminal offences?"

"Oh, excuse me," Bosworth-Davies wrote, "it might impact the confidence they enjoy? Whose confidence, their Mexican drug traffickers, their international sanctions breakers, their global tax evaders, or the ordinary, law-abiding clients who are entitled to assume that their bank will obey the laws imposed on them and will provide a safe place of deposit?"

"Confidence," the former Met detective averred, "what bloody confidence can anyone have when they know their bank is an admitted criminal? When their money is deposited with a bank that breaks the criminal law at every possible opportunity, which cheats them at every turn, sells them fraudulent products, launders drug money, evades international sanctions, moves foreign oligarchs' tax evasion, safeguards the deposit accounts of Third World dictators and their families, then what is that confidence worth?"

Instead, as with the 2010 deal with Wachovia Bank, federal prosecutors cobbled together a DPA that levied a "fine" of $160 million (£99.2m) on laundered drug profits that topped $378 billion (£234.5bn).

Although top Justice Department officials charged that HSBC laundered upwards of $881 million (£546.5m) on behalf of the Sinaloa and Colombia's Norte del Valle drug cartels, federal prosecutors investigating the bank told Reuters in September that this was merely the "tip of the iceberg."

In fact, as Senate investigators discovered during their probe, the bank failed to monitor more than $670 billion (£415.6bn) in wire transfers from HSBC Mexico (HBMX) between 2006 and 2009, and failed to adequately monitor over $9.4 billion (£5.83bn) in purchases of physical U.S. dollars from HBMX during the same period.

Assistant Attorney General Lanny A. Breuer, said in prepared remarks announcing the DPA that "traffickers didn't have to try very hard" when it came to laundering drug cash. "They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account," Breuer said, "using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico's branches."

While Breuer's dramatic account of the money laundering process may have offered a gullible financial press corps a breathless moment or two, a closer look at Breuer's CV offer hints as to why he chose not to criminally charge the bank.

A corporatist insider, after representing President Bill Clinton during ginned-up impeachment hearings, Breuer became a partner in the white shoe Washington, DC law firm Covington & Burling. From his perch, he represented Moody's Investor Service in the wake of Enron's ignominious collapse and Dick Cheney's old firm Halliburton/KBR during Bush regime scandals. Talk about "safe hands"!

Appointed as the head of the Justice Department's Criminal Division by Obama in 2009, Breuer presided over the prosecution/persecution of NSA whistleblower Thomas A. Drake on charges that he violated the Espionage Act of 1917 for disclosing massive contractor fraud at NSA to The Baltimore Sun.

More recently, along with 14 other officials Breuer was recommended for potential "disciplinary action" by the Justice Department's Office of the Inspector General over the Fast and Furious gun-walking scandal which put some 2,000 firearms into the hands of cartel killers in Mexico.

"A Justice official said Breuer has been 'admonished'" by U.S. Attorney General Eric Holder, "but will not be disciplined," The Washington Post reported.

Breuer had the temerity to claim that deferred prosecution agreements "have the same punitive, deterrent, and rehabilitative effect as a guilty plea."

"When a company enters into a deferred prosecution agreement with the government, or an non prosecution agreement for that matter," Breuer asserted, "it almost always must acknowledge wrongdoing, agree to cooperate with the government's investigation, pay a fine, agree to improve its compliance program, and agree to face prosecution if it fails to satisfy the terms of the agreement."

As is evident from this brief synopsis, when it came to holding HSBC to account, the fix was already in even before a single signature was affixed to the DPA.

Without batting an eyelash, Breuer informed us that HSBC has "committed" to undertake "enhanced AML and other compliance obligations and structural changes within its entire global operations to prevent a repeat of the conduct that led to this prosecution."

"HSBC has replaced almost all of its senior management, 'clawed back' deferred compensation bonuses given to its most senior AML and compliance officers, and has agreed to partially defer bonus compensation for its most senior executives--its group general managers and group managing directors--during the period of the five-year DPA."

Yes, you read that correctly. Despite charges that would land the average citizen in a federal gulag for decades, senior managers have "agreed" to "partially defer bonus compensation" for the length of the DPA!

As Rolling Stone financial journalist Matt Taibbi commented: "Wow. So the executives who spent a decade laundering billions of dollars will have to partially defer their bonuses during the five-year deferred prosecution agreement? Are you fucking kidding me? That's the punishment? The government's negotiators couldn't hold firm on forcing HSBC officials to completely wait to receive their ill-gotten bonuses? They had to settle on making them 'partially' wait? Every honest prosecutor in America has to be puking his guts out at such bargaining tactics. What was the Justice Department's opening offer--asking executives to restrict their Caribbean vacation time to nine weeks a year?"

"So you might ask," Taibbi writes, "what's the appropriate penalty for a bank in HSBC's position? Exactly how much money should one extract from a firm that has been shamelessly profiting from business with criminals for years and years? Remember, we're talking about a company that has admitted to a smorgasbord of serious banking crimes. If you're the prosecutor, you've got this bank by the balls. So how much money should you take?"

"How about all of it? How about every last dollar the bank has made since it started its illegal activity? How about you dive into every bank account of every single executive involved in this mess and take every last bonus dollar they've ever earned? Then take their houses, their cars, the paintings they bought at Sotheby's auctions, the clothes in their closets, the loose change in the jars on their kitchen counters, every last freaking thing. Take it all and don't think twice. And then throw them in jail."

But there's the rub and the proverbial fly in the ointment. The government can't and won't take such measures. Far from being impartial arbiters sworn to defend us from financial predators, speculators, drug lords, terrorists, warmongers and out-of-control corporate vultures hiding trillions of taxable dollars offshore, officials of this criminalized state are hand picked servants of a thoroughly debauched ruling class.

Writing for the World Socialist Web Site, Barry Grey observed: HSBC "was allowed to pay a token fine--less than 10 percent of its profits for 2011 and a fraction of the money it made laundering the drug bosses' blood money. Meanwhile, small-time drug dealers and users, often among the most impoverished and oppressed sections of the population, are routinely arrested and locked up for years in the American prison gulag."

"The financial parasites who keep the global drug trade churning and make the lion’s share of money from the social devastation it wreaks are above the law," Grey noted.

"Here, in a nutshell," Grey wrote, "is the modern-day aristocratic principle that prevails behind the threadbare trappings of 'democracy.' The financial robber barons of today are a law unto themselves. They can steal, plunder, even murder at will, without fear of being called to account. They devote a portion of their fabulous wealth to bribing politicians, regulators, judges and police--from the heights of power in Washington down to the local police precinct--to make sure their wealth is protected and they remain immune from criminal prosecution."

Regarding America's fraudulent "War on Drugs," researcher Oliver Villar, who with Drew Cottle coauthored the essential book, Cocaine, Death Squads, and the War on Terror: US Imperialism and Class Struggle in Colombia, told Asia Times Online, it is a "war" that the state and leading banks and financial institutions in the capitalist West have no interest whatsoever in "winning."

When queried why he argued that the "war on drugs is no failure at all, but a success," Villar noted: "I come to that conclusion because what do we know so far about the war on drugs? Well, the US has spent about US$1 trillion throughout the globe. Can we simply say it has failed? Has it failed the drug money-laundering banks? No. Has it failed the key Western financial centers? No. Has it failed the narco-bourgeoisie in Colombia--or in Afghanistan, where we can see similar patterns emerging? No. Is it a success in maintaining that political economy? Absolutely."

Equally important, what does the impunity shamelessly enjoyed by such loathsome parasites say about us?

Have we become so indifferent to officially sanctioned crime and corruption, the myriad petty tyrannies and tyrants, from the boardroom to the security checkpoint to the job, not to mention murderous state policies that have transformed so-called "advanced" democracies into hated and loathed pariah states, who we really are?

As the late author J. G. Ballard pointed out in his masterful novel Kingdom Come, "Consumer fascism provides its own ideology, no one needs to sit down and dictate Mein Kampf. Evil and psychopathy have been reconfigured into lifestyle statements."

Paranoid fantasy? Wake up and smell the corporatized police state.

Greek Journalist Acquitted for Blowing Tax Fraud Whistle. Widespread Corruption Linked to Private HSBC Accounts

Earlier this month, Greek investigative journalist Kostas Vaxevanis was acquitted by an Athens court of charges that he breached data privacy laws with the publication of a list of tax cheats and money launderers.

Vaxevanis, who publishes the investigative news magazine Hot Doc, faced two years in prison and a €30,000 ($38,000) fine over that publication's outing of 2,000 Greeks who hold secret banks accounts at HSBC's private banking arm in Switzerland.

Known as the "Lagarde List," data on high-profile offenders had been transferred to Greek authorities by Christine Lagarde, the former French Finance Minister and current head of the International Monetary Fund (IMF), where it languished for two years.

While the Greek people are forced into abject poverty under an "austerity" regime designed to enrich their corporate masters, a criminal class of political overseers backed by brutal police and rampaging neo-Nazis, billions of euros were shielded as successive "left" and "right" governments failed to act.

Insider Leaks

The Vaxevanis arrest was unique in one respect: unlike official probes into drug money laundering, tax fraud and terrorist financing by major banks, explosive allegations of widespread financial corruption was kick-started by a journalist's investigative digging despite government complicity and cover-up.

And as with other major disclosures which have come to light in the last decade--from the Iraq-Niger uranium fraud, the Downing Street Memo or spying on UN officials by Western intelligence services--Hot Doc's revelations began with insider leaks from a whistleblower.

The source of Madame Lagarde's List was Hervé Falciani, a computer services specialist with HSBC Private Bank (Suisse) N.A., who supervised data migration on individual accounts.

Increasingly troubled by the bank's dubious practices, for two years beginning in 2006, he mirrored account information onto his laptop.

In 2008, an international arrest warrant was issued by Swiss authorities; however, they committed a serious error. Falciani, a dual French-Italian citizen whom neither country would extradite, was picked up in Nice. When French prosecutors, acting on behalf of Swiss police, searched his home and seized his laptop, they discovered files on 130,000 alleged tax evaders.

Rather then arresting Falciani, they opened an investigation into the alleged tax evaders. When French authorities let it slip to the media that had files on some 3,000 Swiss HSBC account holders and that they would prosecute, they recuperated some €1.2 billion ($1.5bn) in unpaid taxes from profligate citizens.

In the interim, a diplomatic row ensued; Switzerland accused France of using stolen data and the French countered, threatening to have Switzerland added to the OECD Tax Haven Black List. Over Swiss objections, then Finance Minister Lagarde shared the data with tax officials in cooperating countries.

Arrested in Barcelona on July 1, Swiss authorities are demanding Falciani's extradition to Switzerland where he faces charges of data theft and violation of bank secrecy laws.

If convicted, Falciani faces a three-year prison term and a fine that could top €200,000 ($253,000).

Revelations contained in those leaked files touched off major probes across Europe. In Italy, Italian Treasury officials recovered some €570 million ($730m) from HSBC account holders.

In Spain, the high-profile investigation into the finances of the banking clan led by Emilio Botín, the wealthy Chairman of the Santander banking dynasty caused a sensation.

And why wouldn't it? Like Greece, Spain's working class is confronted by demands from international lenders to impose draconian austerity measures, including some €37 billion ($46.9bn) in budget cuts in the face of a severe recession and record-high unemployment.

Last spring, El País reported that "Botín, his daughter Ana Patricia Botín (the head of Santander's British banking unit), his brother Jaime and five of his brother's children were among the names of 659 Spanish residents who hold secret Swiss accounts at HSBC Private Bank, with a combined value of some six billion euros."

Confronted by public outrage and threats of criminal prosecution by Spanish authorities over allegations of tax fraud, the Botín clan caved-in and ponied-up €200 million ($253m).

In a report last summer on Switzerland's extradition request, El País reported, "now that Falciani is being held in a Spanish jail, the High Court is faced with a legal problem, according to judicial sources."

Why might that be the case?

"The information coming from Falciani's database has already been used to prosecute Spaniards and no one in Spain has presented a complaint against the former HSBC computer analyst for 'stealing' private bank records."

The most serious hurdle which Swiss authorities must overcome are that allegations against Falciani are not considered criminal offenses in Spain.

"In fact," El País noted, "the Law for the Prevention of Money Laundering states that banks have the obligation to report any illicit activities. This might not apply to Falciani because he was only an employee, but the results from the hundreds of investigations opened in Spain because of his list prove that he complied with the law."

The same cannot be said for HSBC, Santander or other financial giants considered "too big to fail, or jail."

After his July arrest, The Daily Telegraph reported Falciani as saying that "he took the customer details in order to expose tax evasion among HSBC's customers," considering it his "civic duty."

"If you discover that...offshore structures have no other aim than to avoid taxation and that the sole legitimacy of these structures is that purpose," he asked, "what would you do?"

Why you expose the bastards, of course!

This wouldn't be the first time the hammer of "justice" came crashing down on a financial insider who exposed gross financial chicanery, while state officials allowed perpetrators to walk.

Moves against Falciani by the Swiss government are reminiscent of the U.S. Justice Department's 2008 prosecution of UBS whistleblower Bradley Birkenfeld.

A former UBS banker in Switzerland, Birkenfeld blew the lid off a massive scheme by the bank to illegally hide 19,000 U.S. client accounts squirreled away in dodgy offshore tax havens for purposes of money laundering and tax fraud.

The IRS has calculated that the total cost in lost revenue stolen from the American people by wealthy elites may be in excess of $100 billion annually.

This however, pales in comparison to the so-called "tax gap"--the gap between taxes owed and collected. Former IRS Commissioner Charles Rossotti told PBS Frontline nearly a decade ago that the "biggest single source" of the problem are abusive offshore tax shelters which account for an estimated $250 to $300 billion in uncollected revenues; the equivalent of a 15 percent surtax on everyone else.

A U.S. Senate panel at the time, recalling their recent investigation of HSBC, accused UBS and Liechtenstein's LGT Group of marketing tax fraud strategies to rich Americans. In 2009, UBS agreed to pay $780 million in fines and the Treasury Department recovered some $20 billion in unpaid taxes. However, not a single UBS official was criminally prosecuted, or even charged, the result of a sweetheart "deferred prosecution agreement" negotiated with the Justice Department.

Such deals result in little more than a slap on the wrist for well-connected offenders and are considered to be a small cost of doing business.

Readers will recall that the 2010 deferred prosecution agreement cobbled together between the Justice Department and Wachovia Bank led to a microscopic $160 million fine despite strong evidence that the bank, now owned by Wells Fargo, as Bloomberg Markets magazine revealed, had laundered upwards of $378 billion for Colombian and Mexican drug cartels.

As for Birkenfeld? Despite his testimony and cooperation with the federal government in exposing massive fraud by UBS, he was tried and sentenced to 40 months in prison. He pled guilty in 2008 for helping Florida real estate billionaire Igor Olenicoff stash more than $350 million offshore according to Olenicoff's Forbes profile.

However, federal prosecutors lied to the judge when they claimed during his sentencing hearing that he had not exposed Olenicoff's fraud; in fact, he had, on multiple occasions, beginning with his 2007 testimony before the U.S. Senate Permanent Subcommittee on Investigations.

Set to be released this month, Birkenfeld, whom the New York Daily News said deserved "a statue on Wall Street," was eventually paid a $104 million award by the IRS in September for acting as a corporate whistleblower.

Another Day, Another Filthy HSBC Scandal

When news of the Falciani leak went public, Alexandre Zeller, the chief executive of HSBC's Swiss subsidiary said at the time, "We deeply regret this situation and unreservedly apologize to our clients for this threat to their privacy."

Press reports failed to mention whether HSBC apologized to European taxpayers for the role they played in continent-wide tax fraud.

As Antifascist Calling has previously reported (here, here and here), the multinational banking giant stands accused by U.S. Senate investigators of smoothing the way for terrorist financiers and money laundering drug cartels.

Vaxevanis's revelations over the bank's secret Swiss accounts comes at a time when HSBC is "actively engaged" in settlement talks with federal prosecutors. Fines for serious breaches of U.S. banking laws could now reach upwards of $1.5 billion (£940m), The Guardian reported.

According to The New York Times, "prosecutors are considering criminal charges related to money laundering, according to several law enforcement officials with knowledge of the matter. It would be the first such case stemming from the broad investigation."

Despite these facts, and despite claims by current CEO Stuart Gulliver that HSBC's criminal practices were "regrettable" and that the bank "failed to spot and deal with unacceptable behavior," British tax authorities "obtained details of every British client of HSBC in Jersey after a whistleblower secretly provided a detailed list of names, addresses and account balances earlier this week," The Daily Telegraph disclosed.

Among those receiving the red carpet treatment at HSBC's Jersey branch were drug dealer Daniel Bayes, currently on the lam in Venezuela, "Michael Lee, who was convicted of possessing more than 300 weapons at his house in Devon; three bankers facing major fraud allegations and a man once dubbed London's 'number two computer crook'."

According to the Telegraph, the list "identifies 4,388 people holding £699 million in offshore current accounts and they are also likely to have billions of pounds more in investment schemes. Several celebrities and other well-known figures are understood to be identified in the client data."

Unsurprisingly, HSBC's Jersey client list is "heavily dominated by senior figures in the City. Dozens of bankers are understood to have deposited six-figure sums offshore with some institutions said to have 'clusters' of employees taking advantage of the accounts."

"One investment manager has more than £6 million in his account," the Telegraph noted, "while the average amount held is £337,000. Under Britain's non-domicile rules, those with foreign roots only have to pay tax on money entering Britain--provided it is earned abroad. However, more seriously for HSBC, dozens of people with no obvious legal source of substantial income are holding large sums in Jersey."

In other words, like their North American banking affiliate, HBUS, accused of laundering billions of dollars for Mexican drug cartels, HSBC Jersey may be a conduit for European drug syndicates seeking a safe harbor for illicit wealth.

Richard Murphy, a prominent British tax accountant and campaigner against offshore tax havens like Jersey told The Daily Mail the leaked HSBC accounts could be the "tip of the iceberg."

Murphy added: "This bank was clearly out of control. It confirms what we've begun to realise, that this is a bank that was, during the period that the Reverend Lord Stephen Green was in charge, the world's biggest money-launderer."

It now appears from these latest revelations this continues to be the case.

Contradicting claims made in sworn testimony before the Senate Permanent Subcommittee on Investigations last summer that the bank would "apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong," they were singing another tune last week when the Telegraph story broke.

A bank spokesperson averred: "HSBC has a duty of confidentiality and cannot comment on clients even to confirm or deny they are clients. We have good relationships with our regulators and co-operate with investigations when required to do so."

Translation: "if you catch us in the act we'll 'fess up, otherwise mum's the word chumps!"

More recently, The Daily Mail reported that "hundreds of tax dodgers" on the Lagarde List "will escape prosecution and will be allowed to keep their identities hidden."

Despite the fact that some "6,000 British names linked to HSBC bank accounts in Geneva were handed to the tax authorities in 2010 by Mrs Lagarde," HM Revenue and Custom's officials "have decided to offer them immunity in exchange for payment of a penalty and their tax bills."

While "critics have accused tax officials of offering immunity deals to almost everyone on the HSBC list, whether they owe a few pounds or billions," HMRC handed tax fraudsters a cozy arrangement which protected their anonymity and simultaneously shielded serious offenders from prosecution, the Mail disclosed.

Trifling details such as these shouldn't surprise anyone. As the Tax Justice Network pointed out, British tax officials "had sold off 650 of their offices to a company called Mapeley Steps Ltd., a company owned in Bermuda, and leased them back for 20 years."

Mapeley is now owned by the U.S. private equity firm, Fortress, "headquartered in the tax haven of Guernsey. Now private equity firms make a lot of money for their owners--and note carefully that does not mean they make a lot of money for their foolish investors."

It turns out the "company has now revealed a £103m loss and the directors admit that there are material uncertainties as to the group as a going concern."

Ironically enough, guess who might own Mapeley if it goes under? You guessed right if you said: "Britain's tax offices will become the property of its bankers."

Talk about "state capture"!

But it gets worse. As Rowan Bosworth-Davies, a former financial crimes specialist with London's Metropolitan Police observed on his web site Friday, Britain's Financial Service Authority (FSA) are utterly clueless when it comes to cracking down on illegal drug money laundering by British banks.

"The importance of this question is that it goes right to the heart of the whole responsibility of the FSA for regulating one major element of the UK financial market," Bosworth-Davies wrote, "the element of money laundering. Yet the answers appear to be frankly unsatisfactory, complacent, almost evasive, although the first answer from Lord Turner, boss of the UK's financial regulatory agency, was right on the money when he said: 'I would have to say that I do not know the answer to that...'"

Commenting on hearings in the House of Commons by its Home Affairs Committee into the illegal proceeds of the narcotics trade washed through British banks, the former Met detective wrote that "FSA lost the plot a long time ago."

"As a result, the industry they sit above generally despises them, and ignores them most of the time. How else can you interpret the level of financial criminality that goes repeatedly unpunished, the level of organised criminality which is endemic within the British banking sector, and the criminogenic culture which permeates the sector."

In the face of pervasive corruption and official negligence which crosses the line into outright complicity, Bosworth-Davies wonders: "Can we expect prosecutions now to be brought against HSBC as a result of the Jersey revelations today, which are clearly so blatant and so scandalous as to be nothing more than a direct challenge to the authority of the law. Might be ok if we had a prosecuting authority willing to take responsibility to bring a case, but I wouldn't hold your breath!"

"Austerity" Regimes: Fronts for Global Crime

The problem of money laundering, tax fraud and the illegal offshoring of wealth isn't solely an issue for Britain, Greece or for that matter, the United States: it is a global phenomenon. One which clearly demonstrates, as economic analyst Michel Chossudovsky, the director of the Center for Research on Globalization has long observed, represents the "criminalization of the state," that is, the end stage of a capitalist system in terminal crisis.

On the one hand, the managed drug trade overseen by wealthy banking elites, and exploited as a tool by Western intelligence services, and on the other, moves to impose "fiscal austerity" on a planetary scale would seem to be unrelated phenomenon. On the contrary, they represent two sides of the same coin, the upward transfer of wealth by well-connected insiders seeking geopolitical advantage for those in on the game.

Indeed, the same crooked bankers now demanding that supposedly "irresponsible" governments get their "fiscal houses in order" are the very miscreants who thrive on the chaos arising from laundered drug money and financial speculation.

Although Hot Doc's publication of secret HSBC accounts embarrassed the Greek government and their European paymasters, moves to reduce Greek workers to abject poverty continue apace.

With the Greek government knuckling under to "austerity" measures demanded by the European Central Bank (ECB), European Union (EU) and the IMF, a new €31.5bn ($39.9bn) "bailout"--designed to indemnify hyena bankers, not struggling Greeks, from losses--will impose ever-harsher conditions on the working class.

Lining the pockets of institutional lenders who drove the crisis in the first place, let's call the raft of complex cross-currency "swaps," dodgy derivatives and "rescue packages" what they are: a filthy grift which Greeks are forced to pay with their lives.

The "Troika's" latest demands include the imposition of a six-day work week, the continued sell-off of public assets to vampire investors at fire sale prices and the virtual destruction of the social safety net.

Quite naturally, such measures are viewed as a splendid means to bailout financial speculators in Berlin, Wall St. and the City of London responsible for looting the Greek economy. And if millions of people are consigned to the scrap heap? Well, tough luck suckers!

Reuters reported that the Greek government "presented a new austerity package to parliament on Monday as a week of strikes and protests kicked off over proposals that lawmakers must approve if the country is to secure more aid and stave off bankruptcy."

Key features lusted after by the Euro bosses include a "package of measures making it easier to hire and fire workers and a series of cost cuts and tax hikes that should amount to 13.5 billion euros ($17 billion) by 2016."

Greece's powerful unions launched a 48-hour general strike against the government. Tens of thousands of Greek workers took to the streets, opposing a regime that engineered the virtual collapse of living standards. Since the eruption of the so-called European "debt crisis" three years ago, disposable income has fallen by a staggering 35 percent for the average Greek worker.

As the World Socialist Web Site noted in September, "The social situation of the majority of Greeks is already catastrophic. While pensions and wages have fallen by up to 60 percent, mass consumption taxes have been hiked up and millions of jobs cut. In the first three months of this year wages fell by 11.5 percent compared to the previous year."

"The official unemployment rate," reporter Christoph Dreier averred, "stands at 24.4 percent and at 55 percent among young people. Nearly sixty percent of the unemployed receive no state support at all. According to the unions, the real level of unemployment is much higher."

Last week, the World Socialist Web Site reported that austerity measures imposed by the Greek government will include massive "cuts to the health care system. Already decided are savings in health care totaling €2 billion. Part of this sum is to be achieved by laying off 10 percent of doctors and other staff in public hospitals."

Cuts in the budget have already seriously impacted the delivery of vital health care services to Greek citizens.

According to Dreier, doctors and pharmacists "are owed €230 million by the country's biggest health insurance company, EOPYY. As a result," as in cash-strapped Third World countries, "patients must pay in advance at pharmacies and also for some doctors' services and submit the bills later to their health insurer. Such upfront payments are often impossible for the old, the poor and the chronically ill, meaning they have to do without medicines and treatment."

"A growing number of children," the leftist critics noted, "are contracting infectious diseases such as diphtheria and meningitis because their parents cannot afford the necessary vaccines. New HIV infections also increased by over 50 percent in 2011 alone."

In the context of endemic corruption and massive fraud among wealthy elites, it is no surprise that Lagarde's list was passed to Greek officials--and ignored--more than two years ago.

According to multiple press reports, the list was buried by successive governments. Among those charged with the cover-up were officials from the right-wing New Democracy party led by current Prime Minister Antonis Samaras and former Prime Minister George Papandreou's fake "socialist" PASOK organization.

"In the two years since it had been handed to Greek authorities by the IMF's chief Christine Lagarde," The Guardian reported, "the infamous tally of suspected tax evaders had caught the popular imagination ... the failure of successive governments to act on the list and crack down on tax evaders had raised suspicions that corrupt vested interests ran to the top of society."

Greece, Vaxevanis wrote in The Guardian, is an "exclusive club of powerful people" which "engages in illegal practices, then pushes through necessary laws to legalise these practices, granting itself an amnesty, and in the end, there are no media to uncover what really happened."

"The 'Lagarde' case in Greece is merely an extreme expression of this situation," Vaxevanis averred.

"In 2010, Lagarde handed to the then minister of finance, George Papaconstantinou, a list of Greeks who held bank accounts abroad. Some of this was 'black money'--money that may not have been taxed or needed to be laundered."

"In a convoluted train of events," Vaxevanis noted, "Papaconstantinou admitted to losing the original data, but was able to pass another copy to his successor Evangelos Venizelos, who eventually admitted to having held it but has failed to produce it so far. The list has still never been properly investigated."

"It is quite clear the political system did everything not to publish this list" he said.

"If you look at the names, or the offshore companies linked to certain individuals, you see that these are all friends of those in power," he told the Guardian during a recess in his recent trial.

"We live in a country where, on the one hand, tax evasion is rampant and, on the other, people are eating out of rubbish trucks because of salary cuts, because they can't make ends meet."

"They can no longer play hide and seek," Vaxevanis told The Daily Telegraph, "and they cannot demand the little old lady in a village to make more painful sacrifices and have her pension cut when a small group of oligarchs continues to grow wealthy."

In a Reuters interview the journalist said that "the main problem in Greece is the people who govern it. It is a closed group, an elite, one part of which is composed of people from all the parties and the second connected directly or indirectly to business people."

Sound familiar? It should. And if you think "austerity" is a game that only the Europeans are playing, better think again!

With talk of a "grand bargain" in Washington over an alleged "fiscal cliff," Hope and Change™ grifter Barack Obama, feckless Democrats and their Republican brethren are planning to implement a program that will slash the federal budget deficit through massive cuts in education, health care and social spending while leaving the Pentagon's bloated budget virtually untouched.

With "comprehensive tax reform" in the offing, the sole beneficiaries will be giant corporations and the rich who will continue to launder trillions of dollars in "non-taxable" wealth offshore.