by Sergio Casesmeiro

There is a supposed Chinese curse that says “may you live in interesting times” - and unfortunately we do live in interesting – if not at least very confusing times. A new study by the American Civil Liberties Union exposes that more than 3,200 people in the United States are serving life term sentences without the possibility of parole for nonviolent crimes; 80% of them for drug offences. But while mostly poor people are handed criminal records or locked away in cells for nonviolent drug offences, not a single executive from financial institutions accused of laundering drug money has been seen in an orange jumpsuit.

When we see a report about the war on drugs, it often comes with images of some poor bastard in a hoodie being slammed against a wall, or the police storming into some derelict housing state to get some baggies of crack cocaine. But the majority of the people being arrested are just the bottom feeders of the drug game.
In order to be successful drug dealers need to launder their money, that is to disguise how their fortunes are made. According to a UN report 1.6 trillion US dollars – 2.7 per cent of global GDP – was laundered in 2009 alone, with only 1% of that money being seized in.

The UN estimates that the amount of money generated by the drug trade is $322 billion dollars a year – an amount that cannot by accounted for by seizing some luxury cars, plasma TV’s, or villas in southern Spain. Antonio Maria Costa, former Executive Director of the UN’s Office on Drugs and Crime stated that the cycle of economic crises of the last decade left the banking sector in need of cash, and who had plenty of it? Global crime syndicates.

In the United States very few of the “too big to fail” banks seem to fully comply with American anti-money laundering laws. Only three years ago, in the height of Mexico’s drug war, the US Wachovia Bank had to pay $160 million dollars for its inability to stop Mexican drug cartels laundering money through their institution. The same happened to HSBC a few months ago when a US federal judge decided to fine the institution 1.92 billion US dollars for their involvement in money laundering.  HSBC was accused of having become the bank of choice for Mexican and Colombian drug dealers.

Given the evidence, one understands the frustration showed by US Senator Elisabeth Warren (D-MA) when she grilled representatives of the US Treasury and Federal Reserve in March 2013, trying to get a simple answer to a simple question: what would it take to close or to prosecute a financial institution complicit in money laundering? The only answers she could get were half-baked replies regarding some “settlements”, which means that when a financial institution is caught red-handed making money out of a criminal enterprise, the way the authorities deal with it is by reaching an agreement. Hence, they are not prosecuted.

In March, a governor of the US Federal Reserve Jerome H. Powell declared in Congress that “the Federal Reserve does not have authority from Congress to conduct criminal investigations or to prosecute criminal cases. The decision to prosecute a financial institution for money laundering offenses and criminal violations of the Bank Secrecy Act and U.S. sanctions laws is made by the Department of Justice”.

So far, no major financial institution has gotten more than a slap on the wrist. Maybe Senator Warren was right when she stated that institutions deemed too big to fail have become too big to prosecute, or too big to jail.

Powell also stated that: “Banks are expected to perform independent testing for compliance, designate a bank employee or employees that are specifically responsible for Office of Foreign Assets Control compliance”. Everett Stern a former member of  HSBC anti-money laundering  program left disgusted and frustrated by the inability of his superiors to take his multiple warnings seriously. One only has to see his description of his co-workers abilities; “You could walk into that building today and ask anyone there what money laundering is – and I guarantee you, no one will know." Frustrated, Stern went to the authorities with the information he had.

But money laundering is global phenomenon. Earlier this year the British regulatory Financial Conduct Authority issued fines by the value of 13 million GB pounds to international banks for their failure of enforcing proper money laundering controls.

But the globalisation of the economy and the way the financial markets work mean that money can move from one country to other at a speed that doesn’t allow the authorities to enforce the law.

In the meantime, many people have been making lots of money from this situation, and the evidence shows that not only the bad guys are reaping the benefits. The income generated by the illegal drug trade has become an integral part of the global economy; millions are illegally made and reinvested into the legal economy with the help of financial institutions.

While there is no political will to criminally prosecute banks who have enabled drug traffickers to launder their money, no politician can puff up his chest talking about the war on drugs without sounding like a hypocrite.