Just a short week ago, the Second Circuit finally clamped down on the government's biggest ongoing shakedown of industry, the so-called "off label marketing" restrictions of the FDA. That one had netted them well over $10 billion in fines over the last decade for conduct that now appears to have been completely legal all along, indeed protected by the Constitution. Well, now that that one is gone, what is going to replace it?
Already we know! This morning virtually every news source had the story: British banking giant HSBC settled with Federal authorities after an investigation of so-called "money laundering." According to Reuters:
HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses.
Mexico's Sinaloa cartel and Colombia's Norte del Valle cartel between them laundered $881 million through HSBC and a Mexican unit, the U.S. Justice Department said on Tuesday.
$1.92 billion -- that's real dough! Only a couple of the off-label drug prosecutions reached that level. So what is this thing about "money laundering" enforcement?
Those at all familiar with the area will already know that the term "money laundering" is the government's catch phrase employed to give an air of sleaziness to the perpetrators and legitimacy to itself; but "money laundering" enforcement has little to do with the "laundering" of money, whatever that is, and everything to do with the government's forced enlistment of the banks into spying on the citizenry in all financial transactions. The field was created by the so-called Bank Secrecy Act of 1970 (which should more appropriately have been called the Bank Non-Secrecy Act, since it requires reporting to the government on private financial transactions). As amended through today, the Bank Secrecy Act requires banks to collect identification information on each client and to report to the government on any transactions deemed "suspicious," whatever that means. If the government so asks, the bank is not allowed to tell the customer that he is being spied on, and indeed, it is a crime to tell the customer.
Sometimes this is sold to the public as part of the war on terror. That is nonsense, since acts of terrorism do not require large amounts of money (see, e.g., 9/11). Almost all "money laundering" enforcement is really about the Drug War, and as you can see from the above quote, that's what this one against HSBC is about.
So how is money laundering enforcement doing at winning the war on drugs? Well, according to this article from Marijuana Business News, the U.S. marijuana market is estimated to be approximately $100 billion annually -- approximately the same size as the market for "brewed beverages," i.e., beer and ale. OK, maybe that's an exaggeration and it's only $50 billion. How much of that money finds its way into the U.S. banking system? I have my answer: ALL OF IT!
The fact is that money laundering enforcement doesn't put the slightest dent in the drug business. We have allowed the government to deputize the banks to spy on us all 24/7 behind our backs to enable an exercise in total futility. How do those devious drug dealers manage to evade all the spying? Well, here is a great article from the Wall Street Journal in 2007, reporting on the activities of two functionaries of a Colombian drug kingpin.
At 8:50 a.m. on March 15, 2006, Luis Saavedra and Carlos Roca began going from bank to bank in Queens, New York, depositing cash into accounts held by a network of other people, according to law-enforcement officials. Their deposits never exceeded $2,000. Most ranged from $500 to $1,500. Around lunchtime, they crossed into Manhattan and worked their way up Third Avenue, then visited two banks on Madison Avenue. By 2:52 p.m., they had placed more than $111,000 into 112 accounts, say the officials, who reconstructed their movements from seized deposit slips. Confederates in Colombia used ATM cards to withdraw the money in pesos, moving quickly from machine to machine in a withdrawal whirlwind, the officials say. "The organization at its height was moving about $2 million a month," estimates Bridget Brennan, Special Narcotics Prosecutor for New York City.
These two guys were caught by the luck of a tip by an informant. Meanwhile, if you think the banks can do anything effective to stop this, you are just kidding yourself. Despite endless costly efforts at "money laundering" compliance, any given bank takes in anywhere from tens of millions to billions of dollars annually in "drug money," otherwise known as small amounts of cash. So every few years the Feds will come around and shake down each bank for a some millions or billions of dollars. Dare anyone tell them that the Drug War is effectively over?