Global Banks Have Become A Mafia Criminal Enterprise
By former Metropolitan Police Detective Rowan Bosworth-Davies
In August 2012, I wrote a response to a British Parliamentary Commission public request for evidence concerning the state of the British Banking Industry. In that document I made the following assertions;
“…The British banking sector has become an organised criminal enterprise which has been allowed to develop because of the criminogenic environment in which it functions, which has resulted from the absence of any meaningful regulation which those who control and manage the banks would fear.
In this organised criminal category I include the various mis-selling cases, including pensions, PPI Insurance and interest rate swap derivatives; the criminal manipulation by Barclays and other banks of the LIBOR interest rate structures; the institutionalised level of money laundering as identified in the HSBC case; the serial abuse of the US sanctions provisions as indicated in the Standard Chartered Bank case; as well as many other examples of criminal actions such as theft of client funds, teeming and lading, abuse of client instructions, insider dealing, front running, churning, and market manipulation which have become the subject of international regulatory interventions…”
I supported my assertions with three examples of internationally-accepted definitions of organised crime.
Perhaps not surprisingly, the Parliamentary Commission conveniently ‘lost’ my submission, and subsequently claimed they had not received any evidence from me. Later, when it was miraculously discovered to have been in their possession all the time, they told me that large parts of the report would need to be redacted, because it contained ‘evidence which the banks would not like’.
I now realise that I was wrong about one element of my reporting. It is not just the British banking industry which has become an enterprise criminal mafia, the definition extends to a considerable number of global banks as well. Today we learn of the settlement raised against Banque Paribas (BNP Paribas SA, BNPP.PA) for their part in overtly abusing US laws and sanctions requirements. The French bank is likely to pay $8 billion to $9 billion as part of a potential settlement with U.S. authorities over violations of sanctions, according to reports familiar with the matter.
U.S. authorities are probing whether BNP Paribas evaded U.S. sanctions relating primarily to Sudan between 2002 and 2009, and whether it stripped out identifying information from wire transfers so they could pass through the U.S. financial system without raising red flags, sources have said. The investigation has turned up more than $100 billion in books and records violations transactions involving Sudan, Iran and Cuba, one source said on Sunday.
The probes are being conducted by authorities including the U.S. Justice Department, the U.S. Attorney’s office in Manhattan, the U.S. Treasury Department, the Manhattan District Attorney’s office, and the New York Department of Financial Services.
Predictably, foreign politicians and industry apologists are whining and bleating about the actions of the US authorities, asserting that this is all part of some concerted US attack on European banking interests. Speaking for myself, I rather doubt it, but I also don’t give a damn if it is. The issue is very simple, if you want to play fast and loose with US regulations, then don’t whinge if the US regulators capture you.
This episode neatly identifies the state that the global banking industry has reached, in terms of its criminogenic potential and its overt criminal behaviour. What these banks are doing is committing large-scale criminal acts on a grand scale. They are doing this because they think that no-one will do anything to stop them, and it has become a conscious decision to break the law in pursuit of criminal profits. The sums of money placed at risk from the actions of these organised criminals beggars belief. In the UK alone, the history of recent banking crime makes for very unhappy reading indeed.
In the 1980s the financial industry sold around 8.5m endowment insurance policies for repaying mortgage loans. These were not suitable for all borrowers. Banking staff received commission for selling the policies. The risks were often not explained to the borrowers. Banks made profits but eight out of 10 policies failed to pay the promised returns and did not even provide the amounts needed to redeem the mortgages. A 2000 UK Government report estimated that 60% of borrowers had been the victims of mis-selling, which is merely another word for downright criminal fraud, and were facing a shortfall of around £40bn.
This was followed by the pensions fraud scandal where people were encouraged to abandon good employer-based pension schemes and join a private one instead. The £13.5bn scandal affected some 1.4 million people. The late 1990s saw the precipice bonds scandal. Some 250,000 retired people were lured to invest £5bn in investments misleadingly described as low risk. Thousands of investors lost 80% of their savings.
The 21st century did not provide any respite from financial scandals. Payment protection insurance (PPI)is still being played out; some 3 million people were sold expensive and unnecessary insurance and are likely to be paid up to £40bn in compensation. More recently we have had the Libor problems and small-company loan scandal. In between the above, banks engaged in organised and aggressive tax avoidance, tax fraud, money laundering, and now we have the news of the Barclays Dark Pool frauds, just to mention a few of their misdeeds.
If this kind of criminal activity and its concomitant profitability were being carried on by any other agency or group of individuals, anywhere in the world, Governments and law enforcement agencies would have been coordinating their efforts to direct their organised crime strike forces to take down the criminals involved. But because the players in this criminal game are bankers, then for some bizarre reason, Governments and law enforcement take their hands off the controls.
At the moment, the US authorities are making examples of foreign banks who abuse their systems and controls, but they have also penalised their own banking entities. I predict it will not be too long before the US authorities start to demand the extradition of key foreign players to stand trial for their part in these banking crimes. Locking up some bankers who have profited too easily from these crimes, is a long-overdue outcome. The air will be a whole lot sweeter when the US courts start handing out some lengthy sentences for this level of organised banking crime!