In 2004 Hanover Trust, Chemical Bank, Crocker National Bank, Irving Trust and Union Bank were all fined for breech of money laundering laws. Except for Union Bank of California, the others have ceased to exist after being rescued from bankruptcy by other banks who have bought them out. Some analysts see this as poetic justice. The reality is that nothing can kill a stock quicker than a Department of Justice investigation for violating money laundering laws.
More recent prosecutions include American Express, fined $65 million in 2007; Bank of American, fined $75 million in September 2007; and Wachovia, fined $160 million in March 2010. Goldman Sachs and insurance giant AIG have also been indirectly implicated in money laundering, owing to their takeover of smaller financial institutions who have engaged in it.
Are We Willing to Pay the Price?
There seems to be strong consensus that the companies that have been caught at it represent the tip of the iceberg that world governments are merely giving lip service to prosecuting banks that engage in money laundering. In my view the time has come to vigorously prosecute a mainstream bank activity that props up the global plague of illicit drug trafficking. Bank CEOS and board members who become aware of employees and managers who violate drug laundering laws need to cooperate with law enforcement in locking these people up instead of looking the other way or covering it up or face jail time themselves.
I am fully aware that such actions may have serious economic consequences, as they will deprive Wall Street of a ready cash source that has become deeply integrated into the world financial system. I have to ask myself if I am prepared to face an even more severe credit squeeze that will likely result and possibly the loss of my job and my home. I believe that I am.
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