Banking on The Double-Standard

Yesterday, federal prosecutors in New York announced that the operators of a global online currency exchange, similar to PayPal, ran a $6 billion money-laundering operation, which acted as a central hub for criminals trafficking in everything from child pornography to identity theft.

Federal officials said that Liberty Reserve was able to successfully operate outside of the traditional confines of U.S. and international banking regulations, in the largely gray area of cyberfinance.

Liberty Reserve traded in virtual currency, and provided anonymous and easy access for criminals to conduct their business, according to officials. 

Over a period of seven years, Liberty Reserve conducted more than 55 million transactions for millions of “customers” around the world, including 200,000 here in the U.S.

Federal prosecutors are calling the case the largest online-money laundering case in history, and Richard Weber, head of the IRS’ criminal investigation division said that the case heralds in the arrival of, “the cyber age of money laundering.”

On Friday, officials in Spain arrested Liberty Reserve founder Arthur Budovsky.

Budovsky is among 7 people arrested and charged in the case. Two people charged in the case remain at large in Costa Rica, where Liberty Reserve was incorporated.

All of those charged face counts of conspiracy to commit money laundering, conspiracy to operate an unlicensed money-transmitting business and operating an unlicensed money-transmitting business.

The money laundering count carries a maximum sentence of 20 years in prison, while the other two charges carry 5 year maximum sentences.

So, it looks like those responsible for the biggest online cyber money laundering case in history will be held criminally accountable for their actions.

If only the same thing could be said for money launderers who operate off-line, in big banks, like HSBC.

Back in December of last year, Department of Justice and U.S Treasury officials announced that big bank HSBC had allowed some of the most notorious international drug cartels to launder billions of dollars across international borders, while also illegally conducting transactions on behalf of customers in Iran, Libya, Cuba, Sudan and Burma.

At the initial news conference announcing the bust, Assistant U.S. Attorney General Lanny Breuer said that, “HSBC is being held accountable for stunning failures of oversight. The record of dysfunction that prevailed at HSBC for many years was astonishing.”

But what does “being held accountable” really mean?

Does it mean sending banksters who helped to perpetuate a bloody drug war or HSBC executives who lost total control over their bank to jail?

No.

“Being held accountable” means signing a “deferred prosecution agreement,” or DPA, with the Department of Justice, under which no criminal charges will be brought against the bank provided that it meets certain conditions.  Those conditions include paying a $1.9 billion dollar fine.

Despite laundering billions of dollars illegally, dealing with some of the world’s most notorious drug cartels, and moving money for customers in nations that the U.S. has no diplomatic ties with, HSBC is getting off with a slap on the wrist from the Department of Justice.

Even Republicans find the notion of HSBC getting off with what amounts to a slap on the wrist, despite committing blatantly criminal actions, appalling.

Back when the settlement was first announced, Republican Senator Chuck Grassley hammered the DOJ, saying that it was “inexcusable” that they had not brought criminal prosecutions against the bank.

In a letter to Attorney General Eric Holder, Grassley said that, “What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists. I cannot help but agree with an editorial in the New York Times that 'the government has bought into the notion that too big to fail is too big to jail’.”

Fortunately, the HSBC slap-on-the-wrist agreement with the DOJ appears to have stalled.

Judge John Gleeson, who’s overseeing the case, is now believed to be considering rejecting the so-called settlement and deferred prosecution agreement, which could open up HSBC to being criminally prosecuted and losing its charter to do business in the U.S.

Regardless of whether or not Judge Gleeson rejects the deal, how is that a big bank that launders billions and billions of dollars for criminals can potentially get off without any major punishment, but a shadowy online currency exchange company that launders billions for criminals can have its CEO arrested and prosecuted, along with several other executives?

It’s because Liberty Reserve isn’t a real bank, and its employees aren’t real “banksters,” so they can’t get off with pleading guilty, signing an agreement and paying a fine.

Since the executives at Liberty Reserve weren’t the Jamie Dimon’s and Lloyd Blankfein’s of the world, they’ll face the full force of the American justice system.

Right now, there are two justice systems in America: One for the wealthy elite, corporations and big banks, and one for everyone else. 

Thanks to this double-standard, corporations like Wal-Mart that dump toxic waste in our environment get off with a fine, but if an American citizen, and actual person, did the same exact thing, they’d face years in jail. 

It’s time to kill this double-standard!

Corporations and big banks need to be held accountable for their actions, just like everyone else.

Banksters that launder money for drug cartels and hostile foreign nations need to be facing jail time, and not just a slap on the wrist.

Back in the 1980s, Ronald Reagan deregulated the S and L’s, investigated and prosecuted thousands, and sent several hundred banksters to jail.

If Reagan did it, President Obama and his administration can do it too!