HSBC spared a criminal indictment

Tools

The idea of that some banks are "too big to indict" is not necessarily new.

Some felt that Goldman Sachs was such a powerful government bond dealer that a criminal indictment would pose grave risks to the entire system.

"The entire fabric of the global financial system would be threatened," according to one columnist. The theory has cropped back up in the case of HSBC, which has agreed to pay $1.9 billion to settle accusations that it illicitly transacted on behalf of drug cartels, terrorist groups and nations that were sanctioned. But as DealBook notes, the bank was able to escape a criminal indictment for money laundering in part because of the grave consequences that such an indictment would pose.

"A money-laundering indictment, or a guilty plea over such charges, would essentially be a death sentence for the bank. Such actions could cut off the bank from certain investors like pension funds and ultimately cost it its charter to operate in the United States."

Basically, prosecutors were in position to impose a death penalty, as it did to Arthur Andersen in the wake of the Enron scandal. That penalty was debated hotly in the aftermath, and it may be that the government has lost its appetite for a jobs-killing move. Prosecutors were still able to impose a deferred prosecution, a massive fine and a lot of agreements that will hopefully impose a new compliance discipline on the bank. The government can still file a criminal complaint if it deems that the bank has relapsed.

At this point, it's still reasonable to assume that other banks will also be spared criminal indictments.

For more:
- here's the article

Related articles:
Costs of money laundering explode with HSBC settlement