An investigative reporting coalition recently released a report alleging a multi-billion dollar money laundering operation that has affected hundreds of banks and companies in 96 countries including the repeat offender, HSBC.
In 2012, HSBC, one of the world's largest banks, settled with the U.S. Government, avoiding criminal prosecution of its executives, for helping to launder money for Mexican drug cartels as well as Al Qaeda. According to the US Senate's report, which investigated the matter, HSBC provided a "gateway for terrorists to gain access to U.S. dollars and the U.S. financial system."
Loretta Lynch, while serving as the U.S. District Attorney in NY said HSBC engaged in a, "sustained and systemic failure to guard against the corruption of our financial system by drug traffickers and other criminals and for evading U.S. sanctions law." As a result of the criminal charges for money laundering and admitted guilt in four counts against the global banking firm — the megabank was let off with a slap on the wrist.
"HSBC has agreed to forfeit 1.256 billion dollars, the largest forfeiture amount ever by a financial institution for a compliance failure," Lynch stated.
Because they were let off with zero criminal charges, the bank was allowed to go back to crooked business as usual.
The Organized Crime and Corruption Reporting Project published a comprehensive narrative that details how billions of dollars were moved from Russian sources to bogus shell companies before traveling further into various banks, and ultimately numerous companies that inadvertently accepted corrupt funds.
The OCCRP reports:
Money entered the Laundromat via a set of shell companies in Russia that exist only on paper and whose ownership cannot be traced. Some of the funds may have been diverted from the Russian treasury through fraud, rigging of state contracts, or customs and tax evasion. Money that might have helped repair the country’s deteriorating roads and ports, modernize the health care system, or ease the poverty of senior citizens – was instead deposited in a Moldovan bank.
At the other end of the Laundromat, money flowed out for luxuries, for rock bands touring Russia, and on a small Polish non-governmental organization that pushed Russia’s agenda in the European Union. (It is run by Mateusz Piskorski, a Polish pro-Kremlin party leader arrested for spying for Russia).
The Guardian noted the"ingenious" strategy behind how the money was easily relocated from faceless companies to banks. "Typically, company A 'loaned' a large sum of money to company B. Other businesses in Russia – fronted by Moldovans – would then guarantee these 'loans'. Company B would fail to return the 'money'. Moldovan judges would authenticate the “debt”, allowing Russian companies to transfer real money to a bank in Moldova," The Guardian reported.
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HSBC, which is headquartered in London, processed US$545.3m in Laundromat cash, mostly routed through its Hong Kong branch, according to the Guardian.
In response to these allegations, HSBC said, “This case highlights the need for greater information sharing between the public and private sectors, each of whom holds important information the other does not.”
“The bank has systems and processes in place to identify suspicious activity and report it to the appropriate government authorities.”
Apparently, those 'systems and processes' aren't good enough to catch hundreds of millions of dirty money coming through.
An OCCRP infographic further explained that all of the "debt" settlements consistently involved a citizen of Moldova.
A great number of banks accepted these funds easily, and the scheme touched upon at least 96 countries receiving the tainted money including the United States, with money ending up at Citibank and Bank of America. The OCCRP reported that "the 21 shell companies fired out 26,746 payments from their various Trasta Komercbanka and Moldindconbank accounts" between 2011 and 2014.
Earlier estimates of about $20 billion in laundered money through this project were initially reported, but recent projections have increased that number to as much as $80 billion.
While the OCCRP first reported on this operation three years ago, knowledge of the corruption has only begun to reach mainstream news outlets. The Guardian reports that the suspected "architect" behind this massive undertaking is Moldovan businessman Vyacheslav Platon. Platon was arrested and extradited to Moldova in 2016 and has so far denied evidence of any crime.
Moldova has accused Russia of "harassment" related to its investigation of the operation which has been commonly referred to as the "Global Laundromat." The OCCRP echoed that "law enforcement in Moldova, Latvia, the United Kingdom, and Russia continue to investigate the Laundromat, but attempts to bring those responsible to justice and to recover the money have been hampered in part by the reluctance of Russian officials to cooperate."