A substantial wrong has been committed, but nobody is punished. How can that be right?

In 2012, the bank HSBC was fined $1.9bn (£1.5bn) by the US Justice Department for facilitating money laundering by the Mexican Sinaloa drug cartel. Rather than face criminal prosecution, the bank entered into a Deferred Prosecution Agreement, or DPA, which saw a court-appointed monitor checking that over the next five years HSBC was reforming its ways.

The DPA has grown in popularity, used by authorities in many countries to penalise major companies. Instead of bringing charges against the company or individuals, they agree to pay a fine and work to prevent a recurrence. In the UK, the Serious Fraud Office has struck 12 such agreements in recent years.

But is it justice? The DPA is not a device available to you or I. It is only implemented in cases involving corporate offenders. The business may end up paying a fine and taking part in some sort of remedial programme, but its employees avoid standing trial and going to prison – their reputations remain intact.

I’ve been looking at the HSBC case for my new book, Too Big to Jail: Inside HSBC, the Mexican Drug Cartels and the Greatest Banking Scandal of the Century. Yes, $1.9bn was a record amount, but it amounted to just five weeks’ worth of profits for the bank.

A civil penalty paid by the corporation, indirectly by the shareholders, was nothing like the bank and its senior executives being tried and found guilty. Imposing a fine did not cause the bank to suffer. For HSBC, it was an additional cost. Its size was the result of a negotiation; it was just another transaction.

Lord Sikka is Professor of Accounting at Sheffield University and Emeritus Professor of Accounting at Essex University. His specialism? “The dark side of capitalism - investigation of accounting, auditing, corporate governance, insolvency, globalisation, regulation, tax avoidance, bribery, corruption and money laundering.”

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Fining HSBC, said Sikka, was meaningless. “Banks have little, if any, economic incentive to behave honourably. Profits from illicit practices boost share price, dividends and executive pay. Fines become part of business costs and are passed on to customers in higher charges. Directors rarely bear any personal cost. Shareholders happily collect returns and do not directly bear the cost of misdemeanours. Social irresponsibility reigns supreme.”

Fear lay behind the decision not to indict. There were questions about the likelihood of securing convictions and a possible lengthy and expensive trial. It wasn’t fear of losing, however, that was really driving the thinking but fear of winning. The Justice Department feared that if they brought criminal charges, such was HSBC’s size and reach, the whole edifice of global finance could collapse. Subsequent filings to the Financial Services Committee of the US House of Representatives detailed their deliberating.

Elliot Spitzer, the former New York Governor and Attorney General, said: “HSBC committed multiple chapters of impropriety but it got off very lightly. How bad has the wrongdoing got to be before you say, ‘you’re down?’” Spitzer said he was puzzled by the notion that charges would automatically cause the bank to go under and with it, the entire financial system. “I don’t agree with this ‘corporate death penalty’ concept.”

For HSBC, Stuart Gulliver, the chief executive, said he was “profoundly sorry”. Said Gulliver: “It is right that we be held accountable and that we take responsibility for fixing what went wrong.” Spitzer argues this, plus the fine, were nowhere near enough. “I asked [Geithner] if we could not have done more? He replied we could have done, but it would cause a loss to the economy. His point is not without merit, but if you look at banks case by case, HSBC and money-laundering was rampant – it was worse than rampant. And it went to the very top. So, wait, you cut a deal to specifically exculpate the top people and the bank? How does that work?”

The people at the summit of the bank, their advisers and those in the senior levels of government and regulators in the UK and US, went to the same schools and colleges, dined at the same restaurants, hung out at the same gatherings, sat in the same best seats at the opera and ballet, sipped the same cocktails, ate the same canapes. The work and social circles in which they moved overlapped. They talked the same language, held the same values. Hitting a bank with a financial penalty is one thing; bringing criminal charges against people just like you, that is quite another.

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Professor Anthony Sabino from the Peter J Tobin College of Business at St John’s University in New York said we too easily make a distinction between violent and non-violent crime. “Does a banker kill? No, therefore incarceration is said not to be appropriate. But who does more damage: a little punk who knocks an old lady over the head and steals her $200 social security check or a banker who, by their actions, ruins thousands of lives. Who is the bigger criminal? It’s a difficult question because a balance has to be struck. You can say white-collar crime is non-violent but you can also say white-collar crime can facilitate violent crime, which is what happened here.”

He could accept the debate over the use of a DPA, but only so far. “While the prosecution may win very big it may lose very big. You never know how witnesses will react, whether a jury holds up, how the judge will respond. A DPA provides certainty and closure. But you have to ask, does this punishment fit the crime? Is it five weeks’ profit or six months’? Since it’s a DPA, it’s an agreement, it has to be agreed by both sides, it’s a bargaining process.”

But forget all that, ignore the size of the institution, its numbers and connections, said Sabino, “It should ultimately come down to a question of morality. You can do as much cost-benefit analysis as you want, but the bottom line is morality.”

That, surely, is what is forgotten here. A substantial wrong has been committed, but nobody is punished. And that cannot be right.

‘Too Big to Jail: Inside HSBC, the Mexican Drug Cartels and the Greatest Banking Scandal of the Century’ is published by Macmillan