by Henry Meier
Credit union and bank executives who have spent millions of dollars over the last decade complying with the Bank Secrecy Act can be forgiven for dropping the A on the BS (Policy). With theannouncementthat it hadagreed toa”record” $1.92 billion settlement to defer prosecution against HSBC for its willful violation of the BSA, the Justice Department has demonstrated that enforcement of banking regulations is in serious need of repair. As I said in aprevious blogon HSBC, some banks aretoo big to make comply with regulations, rendering theregulations all but useless.
For those of you who may have missed it, HSBCentered into an agreement with the Justice Department in which it admitted to ignoring the most basic elements of BSA and OFAC requirements. Most notably, itfailed to conduct basic customer due diligencewith the result that it effectively facilitated the drug running operations of Mexican drug cartels. As explained by my favorite Senate curmudgeon, Senator Chuck Grassley, in aletterto the Justice Department yesterday, HSBChas effectively purchased “a get-out-of-jail free card” for $1.92 billion onbehalfof its employees, afact which is all the more amazing when we really don’t know exactly how much money the bank made off these illegal transactions. Let’s face it, if you’re big enough, crime really does pay. NoJustice Department official wants to be criticized foreffectively killing a bank by holding its top level officials responsible for blatant misconduct.
Why should this bother credit unions? For one thing, as a simple matter of fairness, a $20 million credit union thatengaged in similar conduct would be facing the possibility of a forced merger or even closure due to its damaged reputation even though itcould facilitateonly a fraction of the damage caused by HSBC.I have argued that all credit unionsmustmake a good faith effort to comply with the BSA, but if this is the way the game is really going to be played, then it’stime we allow institutions below a certain size to be exempt from this requirement.
