In the news lately is the US justice department taking a $2 billion bribe from HSBC bank to drop its investigation of the bank's involvement in money laundering for drug cartels, Islamic terrorists, and state sponsors of terrorism. The popular saying is that the bank's officers are "too big to jail", too politically well-connected to press charges against.
In looking for information on the topic, I found that the story of HSBC's involvement in money laundering was broken earlier this year by the last news organization that I would expect to have a legitimate scoop -- World Net Daily -- and one of the least credible writers in the country, Jerome Corsi, who led the smear campaign against Vietnam War hero John Kerry. Here are links to some of Corsi's articles:
- Banking giant accused of laundering billions
- PayPal, American Express implicated in bank fraud
- Banking giant HSBC 'a criminal enterprise'
The gist is that a former HSBC vice president, John Cruz, left the company with records showing that HSBC opened false accounts for the purpose of money laundering using the social security numbers of HSBC customers. This makes it not only a case of money laundering but of identity theft. Cruz sent the records to several police agencies and news organizations and was ignored by everyone. He wrote a book detailing his allegations and got little attention until WND and Corsi gave him a hearing.
The second scandal
On a second look, the Cruz allegations may be different from what the feds were investigating. The Senate report on HSBC does not mention Cruz or the use of social security numbers but is instead concerned with HSBC sending funds to destinations that are on the Foreign Assets Control blacklist. News reports of the federal investigation tend toward these lines and not those of the Cruz allegations.
So, there are two HSBC scandals: the one in the news and the one that only WND is reporting on.
There may be a link between the Cruz allegations and the HSBC accounts leaked to Hot Doc magazine by Christine Lagarde, for which Hot Doc editor Kostas Vaxevanis was jailed for publishing. On a very brief review, the account holders appear to be people of no note, small scale businessmen and ordinary people. This would tie in well with the Cruz allegations. These could be fake accounts in the names of real people.
Technical details and the lack thereof
According to Corsi, the records of transfers to and from the suspicious accounts are stripped of source and destination. We are shown an image of a report, not the raw data. The database ought to have the source and destination tracking data and some kind of sanity-checking system, as otherwise the system would be so vulnerable to faults as to be too unreliable for any bank to trust. It should also be possible for a database operator to find a matching record in the database for that time and amount of money.
What if the fake accounts are even more fake?
What would stop a bank from simply declaring that it has more money than it does? In normal economics, a debt pyramid collapses when the debtor fails to find new investors, runs out of capital, and becomes physically unable to pay his debts. A bank could create capital as long as it is dealing in debt and not cash. A large bank could, for example, establish a paper corporation to "buy its services" or give it a fake "loan" (with the bank officer embezzling the interest payments) and mark an extra few hundred thousand dollars on its books. Since people in high finance trade in debts, not dollars, no one will call in for their debts to be converted to cash or something tangible.
If this kind of fraud is possible, some of the fake accounts may be well and truly fake to inflate the bank's books and give it more liquid capital.
Somebody using the names "Scott_kevin78", "MrScottsivertson", and "Mr. Sivertson" spammed the same comment accusing Cruz of issuing chargebacks "because he knows how the system works" on the forums below two book reviews and a Youtube video. Might this be damage control on the part of HSBC or one of its clients?