BS(A) Regulation?

December 14, 2012 at 7:27 am 2 comments

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 the announcement that it had agreed to a “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 a previous blog on HSBC, some banks are too big to make comply with regulations, rendering the regulations all but useless.

For those of you who may have missed it, HSBC entered into an agreement with the Justice Department in which it admitted to ignoring the most basic elements of BSA and OFAC requirements.  Most notably, it failed to conduct basic customer due diligence with 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 a letter to the Justice Department yesterday, HSBC has effectively purchased “a get-out-of-jail free card” for $1.92 billion on behalf of its employees, a fact 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.  No Justice Department official wants to be criticized for effectively 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 that engaged in similar conduct would be facing the possibility of a forced merger or even closure due to its damaged reputation even though it could facilitate only a fraction of the damage caused by HSBC.  I have argued that all credit unions must make 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’s time we allow institutions below a certain size to be exempt from this requirement.

One final thought:  there is something wrong with a criminal justice system where homeless people selling small amounts of drugs on the street can face decades in jail for facilitating drug purchases and bank employees who facilitate close to $1 trillion in drug operations get to show up for work the next day as if nothing happened.

TAG Lives (Barely. . .)

The TAG legislation sought by the banking industry that would have extended the insurance guarantee for non-interest bearing accounts died in the Senate yesterday when it failed to clear yet another procedural hurdle.  On a practical level, this means that the only way this bill could possibly be rehabilitated for consideration in the waning days of the lame duck session is if it were combined with the credit union MBL proposal.  But this is still a real long shot and even if that happened it would still have to get through the House before the clock runs out on Congress.

CFPB to Approve Individual Waivers

I will write more about this in a future blog, but the CFPB is proposing granting individual waivers to credit unions and banks that want to test alternative disclosures which can more effectively meet the obligations of federal disclosure requirements.  You will have 60 days to comment on the proposal once it is published in the Federal Register.

Entry filed under: Compliance, General, Legal Watch, Regulatory. Tags: , , , , , .

FED Links Interest Rates To Employment Improvement Too Small To Succeed?

2 Comments Add your own

  • 1. Rick Mantey  |  December 14, 2012 at 8:36 am

    Great comments about the HSBC issue. Your last two paragraphs are especially true and thought provoking. I agree there should have been criminal charges filed against the individuals that knowingly designed a system to avoid the requirements of the BSA.

  • 2. What We’re Reading This Week: A Win For Theory |  |  October 7, 2013 at 4:10 pm

    […] BS(A) Regulation? (New York State of […]


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed

Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 474 other followers