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    Wednesday, July 20, 2016

    Finally An Important Bank Exec Is Arrested

    It looks like Attorney General Loretta Lynch is taking a more aggressive attitude to the crimes of bankers than her predecessor Eric Holder ever did. Holder and other regulators allowed HSBC to agree to a minimal penalty under an agreement that insulated its executives from prosecution in a vast money-laundering operation that was running out of the bank.  HSBC was found to have laundered nearly $1 billion dollars for drug traffickers and processed transactions for countries like Cuba, Iran, Libya, and Sudan who were on the list of countries under sanction by the US. The violations were clear breaches of US law and HSBC knew that what they were doing was illegal. Yet the resulting agreement with HSBC was a pretty weak slap on the wrist and no executives were ever prosecuted. Holder and the Justice Department leadership overruled their own internal recommendation to go after HSBC because of fears that prosecuting the bank could lead to another global financial crisis, or, as the Times calls it, HSBC was "too big to jail". Read the whole shocking story - it is quite sickening.

    Today, on the other hand, HSBC's Mark Johnson, the head of the bank's global forex trading, was arrested and charged with fraud along with a former colleague of Mr. Johnson's, Stuart Scott.  The case involves front-running customer foreign exchange trades and accuses the traders of making over $8 million in profit for the firm by doing so. This is not a huge case, at least in terms of the monetary fraud when you consider what else the global financial community was up to in the late 2000s. And HSBC and other banks have already paid huge fines and large settlements for foreign exchange market manipulation, leading to the dismissal of a large number of traders.  But it is finally nice to see at least one pretty high ranking trader get arrested for his illegal behavior.  Hopefully, this indicates a change in attitude among the prosecutors and regulators of the financial industry.

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