The reality of the world bank

In July 2019, Joaquín “El Chapo” Guzmán was sentenced by a US federal judge to life in prison for drug trafficking and money laundering.

The 62-year-old Mexican drug lord was a top ‘capo’ of the Sinaloa Cartel, the world’s largest drug-trafficking organization with an annual turnover of $3 billion per year through the importation of heroin, cocaine, crystal meth and marijuana. across the Mexico-US border.

HSBC, Britain’s most profitable multinational bank, played a key role in legitimizing this international drug operation. By acting as a financial intermediary, he gave a notorious and murderous criminal regime a veneer of corporate respectability.

In 2012, the United States Department of Justice proved that between 2003 and 2010, $881 million had been transferred from the United States, across the border, to HSBC bank accounts in Mexico controlled by “El Chapo” and other members of the Sinaloa Cartel.

Chris Blackhurst says the amounts of money HSBC accepted from the notorious drug syndicate were likely far higher than this conservative estimate suggests. In Too big for jail the British journalist and former editor of The Independent notes that in just 24 months, $7 billion was paid into HSBC accounts in Mexico.

“The main question I wanted to explore in writing this book was: ‘How HSBC – which in 2002 won the award for World Bank of the Year and was described at the time as the best managed bank in the world – ended up laundering money for Chapo and his cronies?” says Blackhurst from his west London home.

Blackhurst begins by explaining how the operation unfolded from infantryman level upwards. This part of the book reads like a scene straight out of Breaking Bad.

Typically, a member of the Sinaloa Cartel would walk into a local branch of an HSBC bank in Mexico carrying a wallet of dirty dollars in exchange for a cashier’s check.

Bank tellers who asked too many questions were told that their families risked being badly beaten, missing or dead.

“I interviewed a number of Mexican banking supervisors,” says Blackhurst. “It was staggering the details they revealed. The record deposit in a single visit was $933,000. Chapo’s men even had their own handmade purses to bring in the money.

The money was then quickly transferred from HSBC accounts to numerous fake companies across Latin America, to make it legally legitimate.

The relationship between HSBC and the Sinaloa Cartel began in 2002 when HSBC purchased Bital, Mexico’s fifth largest bank. Some skeptics within the HSBC hierarchy in London at this time pointed to the many risks the purchase could entail.

“They pointed out that the Mexican banking industry had a poor compliance record,” Blackhurst says. “But HSBC management thought Mexico was a key country, and if it could develop its value there, HSBC could have access to all of Latin America.

“HSBC then decided that it was not enough to be the best managed bank in the world, it had to become the largest bank in the world.

“And to do that, you can only grow in two ways: organically or through acquisition. HSBC didn’t have the patience to grow organically. So they went with acquisition instead.

Blackhurst says all growth and no compliance has led HSBC to engage in sloppy banking practices globally. Indeed, he points out, it was pretty obvious to HSBC management thousands of miles away at Canary Wharf in London that HSBC in Mexico had indeed been out of control from the early days.

“But HSBC was obsessed with growth and buying more financial assets in other Latin American countries during this period. The bank thought that by simply bringing Mexico into HSBC [global] family, that would be enough on its own, and of course it wasn’t.

Blackhurst also explains why the Sinaloa Cartel was drawn to HSBC. Essentially, it boiled down to a good deal: HSBC offered its Mexican customers the option of holding their savings and cash deposits in US dollars. This was particularly attractive to a criminal enterprise whose primary business partners were drug users in the United States.

Mexican law also states that all bank accounts must be held in the country’s national currency.

But the Mexican peso is notoriously volatile and weak. After all, no savvy business wants to run the risk of holding its profits and savings in a currency that could collapse overnight.

HSBC therefore found a clever legal loophole to circumvent these financial anxieties: offering HSBC offshore bank accounts to Mexican customers who were technically held in the Cayman Islands.

“These bank branches existed only on paper and on computer screens, [but they created] instant access to [dollar] accounts and the ability to transfer money,” explains Blackhurst.

The second half of the book turns its attention to justice. As the

the title of the book suggests, there weren’t many. HSBC came out of it unscathed.

The bank was fined $1.9 billion. Some of the money went directly to the US government, some then went to agencies that investigated the lawsuits.

“$100 million of the fine went to the Queens Police Department in New York, which played a significant role in investigating the street-level money laundering operation in the United States “, said Blackhurst.

“But it’s almost like creating an invisible tax, where a bank is able to just pay its share of wrongdoing and other institutions benefit as a result.”

This fine was also a small change for a bank of the magnitude of HSBC. In 2021, for example, HSBC’s total revenue was $49.6 billion.

“For HSBC, this fine imposed on them was nothing,” says Blackhurst. “All of this leads to the same conclusion: a crime has been committed, and no one has been prosecuted.”

To date, no HSBC staff have faced criminal charges for allowing the Sinaloa cartel to run their money laundering by operating through the bank for several years.

HSBC’s head office in Mexico City; Blackhurst said: “It was pretty obvious to HSBC management at Canary Wharf in London, that HSBC in Mexico had effectively been out of control from the early days. But HSBC was obsessed with growth and buying more financial assets in other Latin American countries during this period. Photo: AP

He came close, however. The Anti-Money Laundering Section of the US Department of Justice wanted to sue HSBC for a while, but in September 2012 George Osborne stepped in.

Britain’s then Chancellor of the Exchequer sent a private two-page letter addressed to both US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Tim Geithner.

Osborne highlighted the UK bank’s global size, influence and importance. He also claimed that a lawsuit against the bank and its top management could cause another global economic catastrophe.

Blackhurst says this desperate appeal has been grossly exaggerated to serve the interests of the UK government and HSBC.

Nevertheless, the Americans swallowed it and a pat on the hand was given to HSBC, instead of any formal criminal charges.

“Osborne’s intervention was absolutely crucial,” says Blackhurst. “Until he intervened, the Americans were determined to press ahead [outright] lawsuits against HSBC.

“Osborne, however, said he felt this was discrimination against a non-US bank, which was simply not true.”

Blackhurst thinks there are striking similarities between the HSBC money laundering scandal and the Great Recession of 2008.

In either case, government intervention meant that dishonest banking practices were neither reformed nor deemed worthy of punishment.

“In the UK, and in many western countries including Ireland, we really don’t take white collar crime seriously enough,” says Blackhurst.

“It should also be noted that in 2008 we were repeatedly told [by our governments] that we couldn’t let any of these banks fail. We now know that was absolute nonsense.

“In fact, Lehman Brothers went bankrupt and, as we have seen, the whole edifice of Western capitalism did not collapse afterwards.

“Furthermore, is it really true that if you go after, say, three, four or five people within a bank, then you have to bring down the whole organization?

“I don’t believe that would be the case, so we really need to get past this argument that’s always made by the powers that be in our global financial system to the western world – that there’s nothing we can do, and we really can’t move against these people.

“It’s a simple matter of right and wrong,” concludes Blackhurst. “A mistake has been made. And no one at HSBC has yet been sanctioned.

“Why? Because we keep saying: The giant global banks, like HSBC, can’t be punished because they’re too big to be jailed.