Money Laundering Still Pays

NEW YORK ( TheStreet) -- Republican and Democratic senators delivered another bruising to financial regulators on Thursday, but if I'm a bad guy looking to launder money, I'm still feeling pretty good about my chances of getting away with it.

This may seem like a surprising statement when you consider that HSBC recently paid a record fine of nearly $2 billion to settle money laundering charges.

But what was clear from Thursday's Senate hearing on money laundering enforcement and statements by U.S. Attorney General Eric Holder on Wednesday is that regulators and prosecutors are scared of shutting down banks that launder money, or even of jailing bank executives who look the other way as the institutions they work for process my suspicious transactions.

As Senator Elizabeth Warren (D, Mass.) noted on Thursday, HSBC admitted "to laundering $881 million that we know of for Mexican and Colombian drug cartels. And also admitted to violating our sanctions for Iran, Libya, Cuba, Burma, the Sudan. And they didn't do it just one time. It wasn't like a mistake. They did it over and over and over again across a period of years. And they were caught doing it. Warned not to do it. And kept right on doing it. And evidently making profits doing it."

Still, Warren points out, "no one individual went to trial. No individual was banned from banking. And there was no hearing to consider shutting down HSBC's activities here in the United States."

So she wants to know, "what does it take? How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like HSBC ."

It's a rhetorical question, of course. No one is going to shut down HSBC and no one is going to put one of their executives in jail.

We know no one will shut down HSBC because Senator Chuck Grassley (R, Iowa) asked Attorney General Eric Holder that question in a Senate Judiciary hearing on Wednesday, and Holder responded that he is "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."

As far as putting an executive in jail, financial regulators have insisted that doing so would be too costly.

So the first line of defense for a bad guy like me is the swamp that is Washington D.C. They have enough committees and hearings and timid officials to ensure that the very worst penalty my banker will have to face for doing business with me is a stiff fine. Assuming they catch us.

But guess what? The chances that I get caught are diminishing all the time. That's because banks are crying poor--blaming the poor economy for cutting back on staffing and technology to detect suspicious activity, according to Comptroller of the Currency Thomas Curry.

At the same time, as American Banker pointed out Thursday, (yeah I read American Banker) online banking and prepaid cards and mobile payments make it increasingly easy for me to move my dirty money.

So, again, as a drug lord or a terrorist, I'm still feeling relatively welcome at my local (or virtual) bank branch. Elizabeth Warren can keep pounding her fist all she likes.

-- Written by Dan Freed in New York.

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