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Big banks take advantage of money laundering epidemic in US

Published time: April 01, 2013 15:13
AFP Photo / Noel Celis

AFP Photo / Noel Celis

The attorney general of the United States says the country’s largest banks may be too big to jail, but the former chief economist for the International Monetary Fund isn’t exactly convinced.

Simon Johnson, the former top IMF economist and a current professor at the MIT Sloan School of Management, published a blistering editorial in Bloomberg News this week that makes an argument for imprisoning the banksters responsible for the nation’s last financial crisis — and possibly the next one — much to the chagrin of Attorney General Eric Holder.

Large international banks, writes Simon, are guilty of money laundering to the degree of epidemic proportions. If recent admissions from the biggest name in the American economy are any indication, though, they have nothing to fear.

“Governor Jerome Powell, on behalf of the Board of Governors of the Federal Reserve System, recently testified to Congress on the issue, and he sounded serious. But international criminals and terrorists needn’t worry. This is window dressing: Complicit bankers have nothing to fear from the U.S. justice system,” writes Simon.

Speaking to Congress last month, US Attorney General Eric Holder admitted, "I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.” Johnson, on the other hand, implores the US Justice Department in his latest op-ed to follow in the footsteps of other countries and to once and for all condemn the corrupt practices that banks have been given a mere slap on the wrist for — and now harsh prosecutions.

In the editorial published Sunday evening, Johnson attacks both the Department of Justice and the Federal Reserve for failing to take action against the big banks.

“There may be fines, but the largest financial companies are unlikely to face criminal actions or meaningful sanctions,” he writes. “The Department of Justice has decided that these banks are too big to prosecute to the full extent of the law, though why this also gets employees and executives off the hook remains a mystery. And the Federal Reserve refuses to rescind bank licenses, undermining the credibility, legitimacy and stability of the financial system.”

Last December, the US government demanded Standard Chartered Bank — the fifth largest bank in the UK—pay up $327 million in fines after being caught guilty of laundering a quarter of a trillion dollars. Bartlett Naylor, the financial policy reform advocate for Public Citizen's Congress Watch, writes for Huffington Post that the sum is “paltry” when put into perspective of what banks should be paying, but even the attorney general — the nation’s top prosecutor — cannot figure a way to pursue much more.

In that regard, writes Simon this week, there’s very little to worry about for banking that may be considering colossal laundering schemes. “[I]nternational criminals and terrorists needn’t worry,” he writes.

Is the US actually becoming a haven for international banks to commit massive money laundering operations? The nations’ top economists seem to admit as much, but why, then, isn’t anything being done? “If you or I tried to launder money, even on a small scale, we would probably go to jail. But when the employees of a very big bank do so — on a grand scale and over many years — there are no meaningful consequences,” writes Johnson.

According to the attorney general, it might just not be possible. "I think that is a function of the fact that some of these institutions have become too large,” Holder said on Capitol Hill last month.

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