Standard and Chartered: US$1.1 billion in fines, on top of an earlier US$667 million.
HSBC: US$1.9 billion in fines.
Deutsche Bank: US$630 million after an earlier US$258 million.
Dutch bank ING US$1.2 billion.
All for money laundering offences, or breaching financial sanctions. And they’re just the nine and ten-figure fines. Eighteen of the 20 biggest European banks have been fined for money laundering offences in recent years.
Recently it’s been the turn of Scandinavian banks, which have laundered stolen billions from Russia through their branches in the Baltic states, with seeming impunity, in rather startling contrast to the progressive moral rectitude with which the Scandinavians like to comport themselves.
Whatever the state of financial services regulation — whether corrupted and lax, like it has been in Australia until recently, or prosecuted zealously by an aggressive regulator, like in the US — one thing has united western governments when it comes to banks: a willingness to go after institutions that enable money laundering.
The global economy is awash with money that needs laundering. The half-trillion-plus in annual drug industry profits from groups like the Mexican drug cartels. The billions stolen by kleptocratic regimes like Vladimir Putin’s and literally housed in London real estate. The vast profits of people-trafficking networks in Europe. Terrorism financing. Child exploitation networks. The finances of sanctioned regimes like North Korea and Iran.
Not to mention bog standard organised crime groups, the proceeds of corruption and the black economy. Trillions of dollars looking for a place to move, store and launder it.
And bank after bank after bank around the world has succumbed to its lure. Sometimes, as was the case with HSBC, there’s evidence of complicity from senior executives. More usually, the banks blame their inadequate IT systems for failing to spot transactions that should be reported to authorities.
They’re inevitably apologetic and promise that things will be fixed and it won’t happen again. Until it does.
What were senior executives and board members at Westpac and the Commonwealth doing over the last decade as their international counterparts had to cough up billions in money laundering fines?
Were they unaware that, when it came to money laundering, the lax regulation and laughable punishments that characterised Australian financial services regulation didn’t apply, but the rather more draconian rubric of national security? Did they think Australia was somehow disconnected from the global world of drugs, child exploitation, people trafficking and organised crime — that no one in Australia ever wanted to send money to terrorist groups, or funnel the proceeds of illicit activities into an offshore haven?
Yesterday Westpac CEO Brian Hartzer belatedly fell on his sword — too belatedly to save Westpac’s reputation as the paedophile’s bank of choice. Director Ewen Crouch is going as well, and chairman Lindsay Maxstead is graciously bringing forward his retirement.
In a demonstration of how power is shifting in Australia, it was industry super funds, not the government, that did it for them, by indicating their discontent with Maxstead’s dog-eared strategy of contrition, reviews, promises to do better and no actual accountability.
That might have worked five years ago; now, it’s just the empty and increasingly rapid ritual before heads, inevitably, roll.
These people are supposed to be the cream of the crop of Australian business. But they’re bizarrely incurious about the operations of the companies they are paid huge amounts to oversee, and apparently oblivious to what has been happening internationally as bank after bank was pinged for letting crooks, child abusers and terrorists use them to move money around.
It’s one thing to gouge customers, charge dead people, run underperforming super accounts and refuse to pay insurance claims. But helping drug dealers, child abusers and terrorists? That Hartzer and Maxstead thought for a moment this was just another scandal defies belief.
And wouldn’t it have been nice to have heard from the new head of the Business Council of Australia about two of its members and their breaches of key regulations. Or from its CEO Jennifer Westacott, who spoke at the National Press Club yesterday and failed to mention Westpac until asked by journalists.
What she did mention, repeatedly, was the need to cut red tape in the economy, because there’s too much of it. Undoubtedly, Hartzer and Maxstead agree.
“Scandinavian banks, which have laundered stolen billions from Russia through their branches in the Baltic states…” The Baltic states. The same Baltic states that are calling for more NATO presence on their soil to protect them from the threat posed by Russia? Curious.
Ignorance? You can read in Michael West’s pages of a couple of days ago that the alleged malfeasance occurred through two financial (transfer) products that Westpac was (is) selling that deliberately side-step the international transfer tracking system SWIFT. In the name of cutting red tape. It’s a bit difficult to claim ignorance of a system that was apparently working as intended, I think.
Another well meaning but narrow take on the wider problems. The public has gorged on bank bashing for quite some time and now our feds have realised there’s a new group to bully and extort at low risk while squeezing them for campaign funds behind the scenes. Talk of “pedophiles bank of choice” is sensationalist bullshit feeding right into the fed narrative as it diverts us away from their own failures to update money laundering laws and procedures. Australia is awash with laundered money.
As I’ve commented here a number of times these high minded sledgehammer laws are doing lots of harm to poor people who can no longer receive remittances – making life easier for crooks of all sorts. Imagine the uproar if our banks decided to crack the shits and freeze our payments in the same manner systems because they’re sick of us ? What is effectively happening is law enforcement is being outsourced not just on the cheap but for fun and profit. It’s not right for shareholders to bear ever rising and uncapped compliance costs while facing extortionate fines and opprobrium while conveniently making life easier for law enforcement. How about they catch these people instead of just bitching about money laundering after the eternal fact.
There’s no doubt Westpac have dodged their SWIFT obligations and failed to properly update older systems. That these offenses are so globally pervasive and recurrent can only suggest something is seriously wrong that needs new and smarter thinking. Do we want to fix the problems or just be righteously indignant on cue every year or three ?
What were the dynamics in the bank that allowed this to happen?
Hartzer didn’t, I assume, one day decide to tap into the paedophile and trafficking market as a deliberate business decision. These situations usually arise either as a process of accretion, pushing the envelope a little bit more past almost imperceptible milestones over time, or as an unintended consequence of other business decisions which work their way into the culture because allowing them to do so seemed a good idea at the time.
But there were decision makers along the line, actual people whose salaries include a component that is justified on the grounds that they have sound judgement, another component being that they support corporate values and another component to do with adding value to the corporation. Are they still getting bonuses? Still receiving positive performance reviews? Still being given glowing references when they apply for other jobs?
There should be a forensic analysis of the flawed process, with individuals called in for questioning and investigated for unexplained wealth for themselves, family members or associates. Retired individuals should not be excused from any part in the forensic investigation.
Enron’s victims included poor people living in the same US state as Enron’s HQ. Bad enough. But Westpac’s victims will likely include children and other exploited people in third world countries who will never receive any redress from the abuse on them that Westpac apparently facilitated.