WARREN QUESTIONS: “if you’re caught with an ounce of cocaine, the chances are good you’re going to go to jail…But evidently, if you launder nearly a billion dollars for drug cartels and violate …
WARREN: Thank you Mr. Chairman, and thank you all three for being here today. As Senator Reed just pointed out, the United States government takes money laundering very seriously for a very good reason. And it puts very strong penalties in place. In addition to monetary penalties, it’s possible to shut down a bank that’s been involved in money laundering. Individuals can be banned from ever participating in financial services again. And people can be sent to prison.
Now in December, HSBC admitted to money laundering. To laundering $881 million that we know of for Mexican and Colombian drug cartels. And also admitted to violating our sanctions for Iran, Libya, Cuba, Burma, the Sudan. And they didn’t do it just one time. It wasn’t like a mistake. They did it over and over and over again across a period of years. And they were caught doing it. Warned not to do it. And kept right on doing it. And evidently making profits doing it.
Now HSBC paid a fine, but no one individual went to trial. No individual was banned from banking. And there was no hearing to consider shutting down HSBC’s activities here in the United States. So what I’d like is, you’re the experts on money laundering. I’d like your opinion. What does it
take? How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this? Mr. Cohen, can we start with you?
COHEN: Certainly Senator. No question the activity that was the subject of the enforcement action against HSBC was egregious. Both in the money laundering that was going on at HSBC and the sanctions violations. For our part, we imposed on HSBC the largest penalties that we had ever imposed on any financial institution. We looked at the facts, and determined that the appropriate response there was a very, very significant penalty against the institution.
WARREN: But let me just move you along here on the point Mr. Cohen. My question is, given that this is what you did, what does it take to get you to move towards even a hearing? Even considering shutting down banking operations for money laundering?
COHEN: Senator, we at the Treasury Department under OFAC and (ph) authority, we don’t have the authority to shut down a financial institution.
WARREN: I understand that. I’m asking, in your opinion, you are the ones who are supposed to be the experts on money laundering. You work with everyone else, including the Department of Justice. In your opinion, how many billions of dollars do you have to launder for drug lords, before somebody says, we’re shutting you down?
COHEN: Well I think the authority to pull a license, pull the charter, is authority that is committed to the supervisors, to the OCC, the (ph) of the supervisor may be. We take these issues extraordinarily seriously. We aggressively prosecute and impose penalties against the institutions to the full extent of our authority. And as I said earlier, one of the issues that we’re looking at –
WARREN: I’m not hearing your, I’m sorry, I don’t mean to interrupt. And I just need to move this along. But I’m not hearing your opinion on this. You’re supposed to be, Treasury is supposed to be, one of the, you are the leaders in how we understand and work together to stop money laundering. And I’m asking, what does it take, even to say, here’s where the line is. We’re going to draw a line here, and if you cross that line, you’re at risk for having your bank closed?
COHEN: So Senator, we’re mindful of what our authorities are, mindful of what the Supervisor’s authorities are. We will, and have, and will continue to exercise our authorities to the full extent of the law. The question of pulling a bank’s license is a question for the regulators.
WARREN: So you have no opinion on that? You sit in Treasury and you try to enforce these laws, and I’ve read all of your testimony. You tell me how vigorously you want to enforce these laws. But you have no opinion on when it is that a bank should be shut down for money laundering? Not even an opinion?
COHEN: Of course we have views on –
WARREN: That’s what I asked you for. Your views.
COHEN: But I’m not going to get into some hypothetical line drawing exercise.
WARREN: Well it’s somewhere beyond $881 million of drug money.
COHEN: Well Senator the actions, and I’m sure the regulators can address this issue. The actions that we took in the HSBC case, we thought were appropriate in that instance.
WARREN: Governor Powell, perhaps you can help me out here?
POWELL: Sure. So the authority to shut down an institution or hold a hearing about it, I believe is triggered by a criminal conviction. And that is not something, we don’t do criminal investigation. We don’t do trials or anything like that. We do civil enforcement. And in the case of HSBC we, we gave essentially the statutory maximum –
WARREN: So –
POWELL: Civil money penalties. And we gave very stringent cease and desist orders. And we did what we have the legal authority to do.
WARREN: I appreciate that Mr. Powell. So you’re saying you have no advice to the Justice Department on whether or not this was an appropriate case for a criminal action?
POWELL: So the way it works is, the Justice Department has total authority.
WARREN: I understand that.
POWELL: This is the heart of what they do. It’s the heart of their jurisdiction to decide who gets prosecuted and for what. It’s not our jurisdiction. They don’t do monetary policy. They don’t give us advice on that. We cooperate with them and we, we discuss with them. We collaborate with them, and we did on HSBC. They ask us specific questions, how does this statute apply? What would happen if we did this? We answer those questions. That’s what we do.
WARREN: So what you’re saying to me is you are responsible for these banks, and again, I read your testimony and you talk about the importance of vigorous enforcement here. But you’re telling me you have no view when it’s appropriate to consider even a hearing to raise the question of whether or not these banks should have to close their operations when they engage in money laundering for drug cartels?
POWELL: I’ll tell you exactly when it’s appropriate. It’s appropriate where there’s a criminal conviction.
WARREN: And so you have no view on it, until after the Justice Department has done it?
POWELL: Again we, the Justice Department makes that decision. We play our role in that. We have a constant dialogue with them around, not just, essentially many, a broad range of violations that take place. We always have the Justice Department involved. But when they, when they make these decisions, they make them themselves.
WARREN: I understand that I’m over my time. And I’ll just say here, if you’re caught with an ounce of cocaine, the chances are good you’re going to go to jail. If it happens repeatedly you may go to jail for the rest of your life. But evidently, if you launder nearly a billion dollars for drug cartels and violate our international sanctions, your company pays a fine and you go home and sleep in your own bed at night. Every single individual associated with this. I just, I think that’s fundamentally wrong.
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