Economic crime is big business – and it’s your money they’re using

This week found me in Cambridge, at the annual International Symposium on Economic Crime, held at Jesus College.

Now in its 40th year, what began with a university don, Professor Barry Rider, bringing together a group of like-minded individuals to discuss the damage wreaked by fraud and money laundering, and how countries should work closer together to try and combat the perpetrators, has grown into a unique event.

Rider used to lecture me in law, and he allowed me to attend as an observer. My first one, in 1987, comprised 30 people – academics, lawyers, senior police officers, legislators – sitting in a room above the old college bar.

This year’s had 600 speakers and 2,000 delegates. The programme of events filled 59 pages. As well as a vast marquee that held the main sessions, there were workshops, seminars and a “Crypto Summit” spread throughout Jesus. Government ministers spoke, as did many enforcement officials, investigators, bankers, judges and attorneys. The audience was truly global.

The theme for 2023, as Prof Rider put it in his introductory note, was “Simply – integrity. We will explore its importance in our public and private lives and how we can best nurture it and protect it.”

I was asked to speak on “How can we best promote and protect integrity in handling other people’s wealth?”

Unlike my fellow panellists – who looked at it from the point of view of practitioners in the field – I took a different approach. I am not a lawyer, nor am I a detective, policymaker, academic, banker or accountant.

But I have worked in the City and I have been writing on business and financial affairs for almost 40 years. The City likes to use three letters, I said: “OPM.” They stand for “other people’s money” and in the eyes of many traders, dealers, brokers and advisers, they represent the best abbreviation on the planet, one that disguises all manner of bad behaviour and exploitation. In bars, in places where they gather and think nobody is listening, they will boast of its use and worth.

What I’ve learned down the decades, I said, was all that mattered to top business folk is their reputation. By and large they’ve made their money, possibly in the UK, and if they are senior enough, they’ve received an honour. They’re the pillar of their community, a member of the golf club, a regular at the opera or theatre, always in the best seats. Their partners are similarly respected and admired.

Nagging away is something else. Some years ago, a very senior corporate figure asked me, late at night over a brandy, how I thought history would judge him? I was taken aback. It seemed absurd. I wanted to say, not as clever as Albert Einstein, not as vital as David Attenborough. His ego and vanity were preposterous.

He was not alone, though. Others thought along similar lines.

This brought home to me that fining mega-businesses and banks was a complete waste of time. That involved zero loss of image. That’s what hurt these people. Hitting their organisation with a financial penalty that it could easily pay and write off as the “cost of doing business” had no impact. In any case, it amounted to little more than an accounting error.

My book, Too Big to Jail, illustrates this point. It’s about how in 2012, HSBC was fined the largest amount in US history, $1.8bn (£1.4bn), for facilitating the laundering of money by the Mexican Sinaloa drugs cartel, led by the fearsome El Chapo. He is incarcerated in a maximum-security jail in the US, but the bankers who helped him were not personally punished.

The US Department of Justice wanted to throw the book at HSBC, to bring its executives to court, to make them stand trial. A last-minute intervention by the British government, in the shape of George Osborne, the then chancellor, saw the Americans relent and, instead, HSBC entered into what is known as a deferred prosecution agreement (DPA).

Over tens of pages, the bank admitted its felonies. In return, it receives a penalty and is entered into a reform programme. As enormous as the fine was, it still only amounted to five weeks of the bank’s profits. No member of HSBC lost their job, no one was publicly named and shamed. There was not even an official or parliamentary inquiry in the UK, where HSBC is comfortably the nation’s biggest bank.

Subsequently, despite agreeing to undergo rehabilitation and mend its ways, HSBC has been fined for committing the same offence – allowing dirty money from the proceeds of organised crime – to be washed through its system.

No lessons were learned. Nothing changed. Once the DPA was entered into, the balance of power shifted. Until then, the DoJ had the upper hand; it held the lever of possible prison and ruination. All those carefully acquired trappings of success would go, the social invitations would dry up, the humiliation would be total.

As soon as the climbdown occurred, I told the conference, there was a switch. Banks are brilliant at negotiating, that’s what they do, it’s in their DNA. They were dealing with government officials who were not so expert.

Why not have a DPA that, instead of agreeing to receive a fine, includes agreeing jail terms for those involved? Perhaps not so lengthy as would be handed down if they pleaded not guilty and were subsequently found to be guilty, but enough. And certainly, sufficient to destroy reputations and ram home a warning to others.

It is the only step they will understand, and will promote and protect integrity in handling OPM, sorry, other people’s money.

Chris Blackhurst is the author of Too Big to Jail: Inside HSBC, the Mexican Drug Cartels and the Greatest Banking Scandal of the Century (Macmillan)