NEWS,16.09.2012

JPMorgan, Bank Of America Probed Over Money-Laundering Allegations: New York Times

Regulators are investigating whether several major U.S. banks failed to monitor transactions properly, allowing criminals to launder money, according to a New York Times story. The newspaper cited officials who it said spoke on the condition of anonymity.The Office of the Comptroller of the Currency, the federal agency that oversees the biggest banks, is leading the money-laundering investigation, according to the Times. The report said the OCC could soon take action against JPMorgan Chase & Co., and that it is also investigating Bank of America Corp. Money laundering allows people to make money often obtained illegally appear like it came from another source.The OCC, JPMorgan and Bank of America declined to comment.The financial industry is struggling to mend its public image. Four years after the financial crisis, banks are getting closer scrutiny. And regulators are under pressure to show that they're not missing any questionable activity.This summer, British bank Barclays PLC settled charges that it had manipulated a key global interest rate. Standard Chartered PLC, also based in the U.K., agreed to settle charges that it had improperly processed money for Iran, brought by the New York Department of Financial Services after the bank voluntarily informed regulators that it was reviewing relevant practices. In the spring, JPMorgan surprised shareholders with an unexpected trading loss.If the OCC takes action, it could be similar to a cease-and-desist order that it filed against Citigroup in April. At the time, the OCC said that Citi had deficient internal controls and anti-money laundering procedures. In bank regulation, a cease-and-desist order doesn't mean that a bank has to shut down, but it is a serious sanction that requires a bank to change its practices. Citi had already told the regulator that from 2006 to 2010, it had "failed to adequately monitor" some of its transactions connected to "foreign correspondent banking."The order in April didn't make any new, specific accusations. But it did instruct Citigroup to tighten its rules so it could improve compliance with the Bank Secrecy Act and related regulations. The act requires financial institutions to report suspicious activity and to put rules in place to try to make money laundering impossible for customers.Last year, JPMorgan paid $88 million to settle charges from the Treasury that it had unlawfully processed money for Cuba, Iran, Sudan and Liberia.At the time, JPMorgan said it had had no intent to violate regulations. It pointed out that it oversaw "hundreds of millions of transactions and customer records per day, and annual error rates are a tiny fraction of a percent."It's not expected that banks would be accused of trying to show support for countries like Cuba and Iran. It's more likely that they would be accused of faulty oversight that made any unlawful transactions possible. The industry has maintained that such violations are almost always unintentional.According to the Times, the Justice Department and the Manhattan district attorney's office are also involved. The Manhattan U.S. attorney's office and the Manhattan district attorney's office declined to comment.

 

Iran's Nuclear Timeline

 

Iran is nuclear capable. If Iran's leaders decided they wanted a nuclear bomb, they could build one. They have the material, the technical ability, and likely have a design. They have had these capabilities for at least five years, when they accumulated enough raw material that could be converted into the core of a bomb.But Iran does not have a bomb now. U.S. intelligence officials have high confidence that Iranian leaders have not made the decision to build a bomb. There is much confusion  some of it intentionally spread about how long it would take Iran to build a weapon.An outstanding team of seasoned national security experts has just published a clear, detailed explanation of Iran's nuclear timeline. The report of the Iran Project was endorsed by 34 security leaders, including Brent Scowcroft, Sam Nunn, Gen. Tony Zinni, Adm. James Fallon, Gen. Frank Kearney, Carla Hills, Anne Marie Slaughter, Chuck Hagel, Adm. Joe Sestak, Jessica Mathews, Zbigniew Brezinski, Nicholas Burns and this author.Here is an excerpt from the report (on p. 22) that provides a sound basis for debating what actions should be taken to convince Iran not to build nuclear weapons. This report is intentionally conservative. There may be serious technical problems that make the timeline much longer. I have highlighted in bold key phrases.While there are differences of opinion on this issue, we believe it would be extremely difficult for Iran to hide a nuclear program devoted to weapons development. No monitoring and detection system is failure-proof, but Iran has little reason to be confident that it could get away with creating a secret program to produce fissile material for a weapon.Were Iran to attempt to produce a single bomb's worth of highly enriched uranium (HEU), it would take at least one month (although some experts believe the timeline could be as long as four months or more). It is important to note that while the ability to build a single bomb is a somewhat useful theoretical construct, it has little or no correspondence to how nuclear weapons programs function in the real world.Historically, no country in the nuclear age has sought as its goal to build one nuclear weapon; nor has any country adopted a strategy of building one weapon knowing that as a consequence, its program would be exposed. The timeline for producing a single bomb's worth of HEU is subject to change, depending on the number and type of operational centrifuges available as well as the size of Iran's stockpile of already enriched uranium, particularly 20% enriched uranium. Conservatively, it would take Iran a year or more to build a military-grade weapon, with at least two years or more required to create a nuclear warhead that would be reliably deliverable by a missile.In short, it is likely that the United States would receive some warning and have at least a month to make a decision on action -- military or other. Understanding the difference between the one-month timeline of producing sufficient fissile material in order to produce a weapon, and the two-year timeline of creating a nuclear warhead, is critical when considering the likely success of military action.After a month, the weapons-grade uranium (WGU) could be reduced significantly in size (25 kilograms); if properly encased, it could be easily hidden and would be highly mobile. This would be a very hard target to detect and destroy. While it would take some additional time for Iran to translate the WGU into a meaningful military capability, the ability for the United States or others to launch preventive military strikes would be reduced. In contrast, the facility used to enrich the WGU is immobile and large and therefore an easier and somewhat vulnerable target (unless deeply buried)....The more apparent the decision to make a weapon, the more persuasive the justification for military action would be to the international community, including the United Nations Security Council. While Israel's more limited military capabilities and earlier "red line" create a closing window of opportunity to take military action, the U.S. could afford to wait for its red line to be crossed Iran undertaking a dedicated weapons program before deciding whether to take preventive military action....Given the deepening mutual distrust between the U.S. and Iran; congressional sympathy for Israel's perspective on a nuclear-capable Iran; and the conviction among some parties that Iran has already secretly decided to build a nuclear weapon, we believe the most likely military scenario is one in which preemptive, unilateral action against Iran is initiated by the U.S. and/or Israel, under conditions of some uncertainty about Iran's real intentions.

NEWS,17.07.2012

Olympic security group in tatters, admits CEO

 

The chief executive of G4S admitted that his management of the London Olympics staffing scandal had embarrassed the British government and left the world's biggest security group's reputation in tatters as he fought to save his job on Tuesday.G4S has been at the centre of a political firestorm that has wiped $US1.1 billion ($NZ1.37 billion) off its market value since it announced that it could not provide the promised 10,400 security guards only two weeks before the Games.Shares in the group closed down 5.7% after Chief Executive Nick Buckles appeared before a parliamentary committee, struggling to answer several questions and saying he wished he had never taken on the Olympics contract.At one point, when asked whether his staff would be able to speak fluent English, he responded that he did not know what fluent English was.After being assured that he was speaking English himself, Buckles went on to say that the group still expected to take its 57 million pound ($NZ111.7 million) management fee from the Games.G4S has said that it could lose up to 50 million pounds on the Olympics security contract, worth 284 million pounds.The embarrassing staffing admission has ignited a wider row over the British government's decision to outsource key work to the private sector and left ministers from the Prime Minister down trying to explain how the failure was allowed to develop."Many would take the view that the reputation of the company is in tatters," Buckles was told by one member of the Home Affairs Select Committee after being summoned at short notice to explain the debacle."I think, at the moment, I would have to agree with you," Buckles said, looking uncomfortable and sitting ramrod straight before lawmakers in the ornate wood-panelled room."We have had a fantastic track record of service delivery over many years in many countries, but clearly this is not a good position to be in," he added.The debacle has overshadowed the build-up to the Games only 10 days before the world's biggest sporting event begins, reviving memories of previous embarrassments for the company, such as a string of prisoner escapes and riots.Last year the group left inmates locked up for almost 24 hours at a British jail after losing the keys to cells. In another incident, guards tagged a man's false leg, allowing him to remove it and break a court-imposed curfew."Certainly my view, and the view of the board, is I'm the best person at the moment to take this through," Buckles insisted.To fill the gap left by G4S, the government has called up an additional 3500 soldiers, many of whom had just returned from lengthy deployments in Afghanistan.On Monday it emerged that, as well as extra troops, police officers were being deployed earlier than planned to cover for some G4S staff who had failed to show up for work.The row is a blow for Buckles, who worked his way up through G4S over 27 years with a no-nonsense management style.” Clearly we regret signing the contract, but now we have to get on and deliver it," he said after being asked to answer questions more directly.Only 11 days ago, the managing director of G4S Global Events, Ian Horseman Sewell, told Reuters that the company was so confident about the Olympics that it believed it could stage another similar-sized event at the same time if needed - a line that was repeated numerous times at the committee hearing.In a blow to the group's future earnings, Buckles indicated that the group would now not bid for work at either the soccer World Cup or the next Olympic Games, both to be held in Brazil, a key emerging market for G4S.Buckles said that the company would seek to compensate the police and consider a bonus for police and troops, prompting the chairman of the committee to ask if he was making up plans on the spot. A further 500 troops are on standby in case needed, Buckles said.Espirito Santo analyst David Brockton believes that G4S will come out relatively unscathed in the longer term, though Buckles could pay the price for the company's failures."If G4S can deliver the minimum 7000 (venue guards) that they expect to deliver, then today is the eye of the storm and the vitriol will subside over time and (we) will perhaps see the departure of Nick Buckles after the Olympics."The company's second largest shareholder Invesco, however, said that it thought the market had overreacted and told that Buckles should not be forced to stand down for failures made by local staff.

HSBC linked to Mexican drug trafficking

 

HSBC Holdings Plc told a US Senate panel today that it has dealt head-on with allegations of pervasive money-laundering through bank accounts, saying it has overhauled how it polices transactions, exited lucrative businesses and shaken up executive leadership.HSBC offered up the changes after the Senate's Permanent Subcommittee on Investigations released a report accusing the British bank of a "pervasively polluted" culture, underscoring money-laundering problems have been flagged by regulators for nearly a decade.The report said the bank routinely acted as a financier to clients routing funds from the world's most dangerous corners, including Mexico, Iran and Syria.During a hearing on the Senate report, David Bagley, a top compliance executive at HSBC since 2002, said he would step down.The resignation was part of HSBC's effort to apologize and show that it has cleaned up its act, even as the bank faces fresh questions about whether it has really fixed major flaws in catching and stopping money laundering.A  investigation has found persistent lapses in the bank's anti-money laundering compliance since 2010.Senator Carl Levin, who chairs the Senate's Permanent Subcommittee on Investigations, kicked off the hearing by detailing how HSBC's lapses have systematically allowed suspicious actors to access the US banking system."Accountability for past conduct is essential. That's what's been missing here," Levin said, adding that the bank's charter could be at risk if it did not do better.The bank is still facing a Justice Department investigation could soon yield a fine that dwarfs the record $619 million that Dutch bank ING agreed in June to pay to settle similar accusations.Bagley told the hearing that while reforms had been made at HSBC, it was time for him to go."I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance," he said.Bagley also told the Senate panel that the bank would close thousands of Cayman Islands accounts as part of its renewed compliance efforts."That's good news," Levin said.The Senate report said HSBC had little oversight of client accounts housed in a shell operation in the Cayman Islands, well known for offering secret accounts and a limited tax regime. By 2008, the Cayman accounts held $2.1 billion.Bagley was on a panel with other high-level HSBC executives, but the harshest spotlight is expected later when Stuart Levey, who joined the bank in January as chief legal officer, is due to testify.He had been the Treasury Department's top official on terrorism finance from 2004 to 2011 - during which time he was involved in cracking down on HSBC for Iran-related transgressions.In prepared testimony released at the start of the hearing, Levey placed much of the blame on HSBC's rapid expansion, which left in place a decentralized management structure that did not implement consistent standards across the bank and viewed compliance only as an advisory job.Levey said the bank has reorganized its businesses to make the firm better connected to manage risk.The changes Bagley and Levey talked about are coming at a great cost to the bank, as spending on anti-money laundering systems and staff have increased substantially.HSBC Bank USA CEO Irene Dorner, in prepared remarks, said the bank now has 892 full-time anti-money laundering compliance professionals.HSBC shares closed 1.7% lower in London trade. Analysts warned that the bank faced huge financial penalties -- but perhaps worse, was now in the crosshairs of politicians."(The) most important consequence is that the bank is now under the microscope ... at a very bad time where banks are used as scapegoats by politicians globally," analysts at Italian bank Mediobanca said in a research note, adding that they expect HSBC to face a $1 billion fine as well.In a statement to British regulators today, the bank began its mea culpa."We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect," it said.The Senate report detailed how between 2007 and 2008, HSBC's Mexican operations moved $7 billion into the bank's US operations.Both Mexican and US authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds, the report said.It also examined banking HSBC did in Saudi Arabia with Al Rajhi Bank, which the report said has links to financing terrorism.HSBC will have company in the Senate's harsh spotlight - the report was also highly critical of the Office of the Comptroller of the Currency, a major US bank regulator.In prepared testimony, the OCC acknowledged the need for changes in its oversight of anti-money laundering operations, as called for in the Senate report.The OCC will also testify on the extent of the failings it found in HSBC's money laundering controls, and the orders it issued to the bank to correct them.The exhibits for the hearing also provide new clues about how the Justice Department and regulators developed their probes of HSBC and Mexican drug trafficking.A July 2009 email from an OCC official to the bank relates a call received from the US Attorney's office in Brooklyn.The OCC official said that an assistant US attorney "said that his office is in the early stages of investigating possible money laundering through the repatriation of US currency through accounts at the banknotes division of HSBC-N.Y."The author of the email, Daniel Stipano, is an OCC lawyer scheduled to testify today.Later that day, Stipano told his peers at the OCC, "From what I can tell, this has the makings of potentially being a major criminal case- we need to be all over it."According to the Senate report, the OCC didn't take strong action against the bank until the fall of 2010, after the agency had learned of US law enforcement probes.