G&A Check Cashing was fined nearly $1 million and will be on probation for two years. Gasparian and the company were also ordered to forfeit just under a quarter million dollars related to funds that had moved through the check cashing company illegally.
Top officials at the Department of Justice had tough words for the defendants, who pleaded guilty to charges of conspiring to fail to file currency transaction reports — required documentation for payments or transfers of more than $10,000 — and of failing to have an effective anti-laundering program.
Gasparian, Sanchez and G&A "purposefully thwarted the Bank Secrecy Act, making it easier for others to use G&A to commit illegal activity," Lanny Breuer, assistant attorney general of the Justice Department's criminal division, said in a Jan. 14 press release. "They knew they were required to report transactions over $10,000, but deliberately failed to do so. As this case shows, check-cashing businesses must adhere to our anti-money-laundering rules, or else pay the consequences."
But the case also highlighted the disparate treatment of certain institutions for violations of anti-laundering laws.
While G&A was hit with criminal penalties, the Justice Department took no criminal action against the much larger HSBC, either individually or at the bank itself, despite the fact that it was accused of arguably worse crimes, including enabling drug runners and terrorist financing.
Although HSBC ultimately agreed to a costly settlement, a number of critics are asking if large institutions are receiving lighter treatment because of their size, while smaller banks and nonbanks get the book thrown at them.
The G&A case "clearly demonstrates that these laws can be enforced through the criminal process, and that the process can establish sufficient guilt to jail offenders," said Lawrence Baxter, a former Wachovia executive now teaching at Duke University's law school. "But for the lack of publicity surrounding the L.A. convictions, I am confident that there would be public indignation at the differential treatment that those convictions and the never-ending series of 'settlements' reached with most of the large banks over AML violations seem to suggest."
It is hardly just HSBC. Regulators have hit other institutions in recent weeks, including Standard Chartered Bank and JPMorgan Chase, for significant violations of anti-laundering laws, yet so far there have been no criminal prosecutions. The concerns extend beyond anti-laundering charges to other types of cases. Several critics, for example, have warned about the dearth of criminal prosecutions against bank executives for transgressions in the mortgage industry and elsewhere leading up to the financial crisis.
Observers say concerns about the basic fairness of the U.S. justice system have real potential to further erode public trust in the biggest institutions and the government officials that oversee them.
In an American Banker reader poll conducted from Dec. 17 to Dec. 23, a mere 8% of respondents thought authorities took the right course with HSBC. Just under half, 47%, said that the Justice Department should have prosecuted the bank; 45% said that authorities should have gone after the individuals responsible for the violations.
"The Justice Department has undermined public confidence in the fairness of our system through its repeated use of deferred prosecution agreements for 'too big to fail' banks and its consistent failure to prosecute senior executives of those banks," said Arthur Wilmarth, a professor at George Washington University's law school. "Concerns about the 'stability' of the financial system do not justify DOJ's policy of leniency for TBTF banks and their executives, especially when DOJ routinely indicts smaller institutions and sends their managers to jail for similar offenses."
Collateral Damage
The DOJ and regulators announced the record $1.92 billion settlement with HSBC last month as part of a deferred prosecution agreement with the bank for a number of crimes. As part of the agreement, HSBC admitted guilt to a host of violations — standing by as drug traffickers laundered hundreds of millions of dollars, failing to monitor billions of dollars in wire transfers and knowingly permitting hundreds of millions of dollars to move through the financial system on behalf of banks in Cuba, Iran and Sudan, despite U.S. sanctions against those countries.
Observers said that Breuer offered a rare window into the Justice Department's thinking last fall, during a speech before the New York City Bar, on the rise of deferred prosecution and nonprosecution agreements. Both are deals made with the government in which a company or individual defendant agrees to make certain changes in exchange for having those charges dismissed or not filed in court. If the contract is breached, the government reserves the right to renew the charges.
