You'd have to completely reframe the penalty for crimes to be percentage based instead of fixed amounts. Even when caught the penalties are often so low that they don't matter, so white collar criminals go right back to it. When you can routinely make $10 million doing something a $1 million fine the one time you get caught just isn't a big deal.
The cost-benefit analysis almost always favors the criminal for white collar crimes (or any non-violent crime, really) when you have money. If I had $100m+ I wouldn't really pay attention to the law either.
The justice department also called this a fair punishment for an unrelated money laundering crime for Saudi nationals funding of terrorism. They didn't even bother to bring charges. (Which is a perfect answer to your question.)
"of yearly profit" is not the relevant comparison. What is relevant is the amount of money they made from the cartel money laundering. I am preeeeety confident that HSBC didn't make ~10% of it's profits from these transactions.
“Moreover, the dollar transfers earned HSBC hefty fees. The Senate investigation quoted an HSBC email lamenting how the bank would lose $2.6 billion in revenue from U.S. dollar accounts that it was forced to close because of the Mexico fiasco.” *
First, apparently HSBC was making 2.6 billion USD (annual?) revenue from these accounts, and was fined 1.9 billion USD. Second, it is not a certainty that a company engaging in illegal behavior will get caught and fined. The company’s “expected value” function would multiply the expected fines by the chance of being caught. We can only observe the world in which they get caught and perhaps pay a fine larger than what they made. We don’t see the world in which they don’t get fined, which makes the illegal behavior on average profitable.
You can't just apply the margin like that. You have to estimate the marginal cost of the extra business.
For something like banking I'm fairly certain that the marginal cost is tiny. It takes a lot of money to setup all the systems needed for moving money around, but once they are in place the difference between 10b and 11b flowing through them is tiny. As such HSBC probably pocketed most of that revenue.
Please read the second paragraph again. Where they didn't even bring charges for an unrelated crime of financing terrorism that they found out later. That was my answer to your question.
Well that again isn't an example of someone being caught and receiving a penalty lower than the gain from the crime.
I don't know why the justice department didn't pursue charges here. Maybe HSBC wasn't guilty? Maybe there wasn't sufficient evidence to win? Who knows. But this isn't an example of a caught party with a "so low that they don't matter" penalty.
> Well that again isn't an example of someone being caught and receiving a penalty lower than the gain from the crime.
I disagree... and frankly, just saying it isn't is a poor answer.
> Maybe there wasn't sufficient evidence to win?
Once again, your ignorance shows. The Justice Department expressed concern it would threaten the health of the financial system if they were too hard on HSBC at the time so they gave a low fee and ignored another crime.
> But this isn't an example of a caught party with a "so low that they don't matter" penalty.
I didn't say it was. I was answering your above question about a party that was 'caught' and faced a lower... NO penalty, in this case.
Banks are require to abide by a charter that requires good behavior. For evidence of criminal conduct that charter can be revoked and HSBC should have lost their right to operate in the United States. I would certainly call that a fee so low they don't matter penalty.
Especially since HSBC is now being accused of money laundering again... this time by Nigeria.
All you are giving is negative arguments. Saying things are not, and raising speculation without a basis does not add to the discussion. I am done with this.
No penalty is not the same thing as a lower penalty. You don't go around saying people got a lower penalty that were never actually prosecuted for something.
You claim the parent is speculating without basis but the parent is asking for an example where a normal penalty is lower than the profit, because that is an extraordinary claim.
If hsbc was able to profit from money laundering while paying they penalty, they would still be doing it. They obviously had no moral barriers to doing it before so why would they stop?
There was a case only last year involving manipulations of cattle futures. The firm made the decision that the cost of being caught was less than the potential penalty, and they were right.
It's not about criminal convictions. In theory it's just a civil case with a criminal case to follow. Which is why SEC fines are often less than the net befit. But, the actual number of criminal cases is rather low.
EX: "In June 2009, the SEC sued Angelo Mozilo, former CEO of mortgage lender Countrywide Financial, and two other former officers, charging that they misled investors about the quality of Countrywide's loans while knowing the company was fueling its growth by letting its underwriting guidelines deteriorate and originating a growing number of risky subprime loans. In October 2010, the SEC settled the lawsuit and Mozilo was required to pay a fraction of the $521.5 million he had earned, just $67.5 million in penalties" https://en.wikipedia.org/wiki/List_of_major_SEC_enforcement_...
The issue is that Mozilo's behavior resulted in personal gains against extreme public losses. It's in our best interest as a society to deter such behavior, while enabling whatever legitimate business Countrywide conducted. How do we best do that? The public at large wins — Mozilo should win, the public at large loses — Mozilo should lose.
I think GP's point is that a $60M fine (against $520M in earnings) is not a an effective deterrent against such antisocial behavior.
I agree all is a bit much but, it is more than 13% including penalties, especially when you include the effect the 'boosted' earnings had on the stock price.
But the general thesis that people are making so much money from their crimes that they don't fear criminal penalties seems to hold. like the 2.x billion in profits lost from the 1.9 billion fine?
A percentage of what though? A percentage of unlawfully obtained income or a percentage of personal wealth, whether or not it’s connected to any unlawful activities?
If all you lose is the income from illegal activity and a small fine it’s not much of a penalty now is it? The criminal justice system needs to be as vicious against criminals as collection agencies are against poor people.
I really have no problem seizing absolutely everything from somone who manipulates markets or defrauds investors. In fact, step it up. Seize everything and stick them with a lifetime of debt that can’t be discharged.
In that case, regardless of the merits of the idea, it’s constitutionally rather problematic in the United States, as the Eighth Amendment prohibits imposing excessive fines.
The cost-benefit analysis almost always favors the criminal for white collar crimes (or any non-violent crime, really) when you have money. If I had $100m+ I wouldn't really pay attention to the law either.