25 thoughts on “European Union bigwig Neelie Kroes’ Bahamas money scandal

  1. Thursday 22nd September 2016

    posted by Morning Star in Features

    Steven Walker charts a crime wave of extraordinary proportions that gets little or no attention

    IT COMES to something when the governor of the Bank of England announced recently that corrupt bankers represent a threat not only to those ordinary people they directly rip off, but also potentially the entire global capitalist system.
    He is on record as warning that the illegal and fraudulent activities by the major banks in recent years was undermining trust in both financial institutions and the markets.
    What he really meant was that everyday practice that had been tolerated, colluded with and carefully hidden from public scrutiny, had now been exposed in the context of the latest capitalist crisis in order that a few scapegoats could be sacrificed and token fines levied.
    In recent years major banks around the world have been forced to pay billions of dollars in regulatory fines and compensation for a wide range of offences from rigging interest rates and mis-selling financial products to households to ripping off corporate clients. Very few bank executives or senior managers who oversaw these practices have faced justice.
    In July a judge at Southwark Crown Court jailed four former Barclays bankers for conspiring to rig Libor. And the former UBS and Citigroup trader Tom Hayes is serving an 11-year sentence for conspiring to manipulate interest rates. These are the scapegoats — small fry compared to politically well connected bosses earning tens of millions of pounds per year.
    The fines which grab tabloid headlines and the amounts of money involved in fraud are mind-boggling and hard for ordinary working people to comprehend. For example banks were fined in the region of $22 billion (£14.5bn) for their part in the Libor fixing scandal in 2013. The London interbank lending rate, Libor, supports trillions of pounds’ worth of loans. In 2012, British banks were accused of inflating and deflating Libor to encourage a profit from trades. Barclays chief executive Bob Diamond resigned without penalty after his bank was fined £290 million for its part in the Libor scandal.
    The biggest banking scandal in terms of the number of people affected was the mis-selling of financial products. Since the 1990s, millions of customers were mis-sold insurance policies which they did not need, to pay off loans or mortgages should they die, become ill or lose their job.
    Banks alone are thought to have paid out around £22bn in compensation. As of January 2015, the financial ombudsman had dealt with 1,250,000 complaints — not including complaints made directly to banks and credit card companies.
    In 2012, British bank Standard Chartered paid a $340m fine with the New York State Department of Financial Services (DFS) after being accused of hiding $250bn of transactions with Iran. The bank was accused of leaving the US financial system susceptible to terrorists and “drug kingpins.” Two years later, Standard Chartered agreed to pay $300m to DFS after failing to improve its money laundering controls.
    Barclays, RBS, HSBC and Lloyds were forced to compensate thousands of small businesses who were mis-sold complex insurance deals. These rate-swap products were designed to protect firms against rising interest rates.
    But in 2013, the Financial Standards Authority said that it found 90 per cent of cases it examined did not comply with regulatory requirements. Barclays set aside £450m for compensation. HSBC, RBS and Lloyds also incurred costs.
    In 2014, US and UK regulators imposed a £2.6bn fine on five banks for conspiring to manipulate foreign exchange rates. Investigators found there was a “free for all culture” rife on the trading floors of RBS, HSBC, Citibank, JP Morgan and UBS. HSBC was fined £216m, the biggest fine of all British banks.
    An “elephant deal” executed three years ago has cost Barclays £72m in penalties after the City regulator concluded that the bank ran the risk of being used to launder money or finance terrorism. It was the largest deal of its kind that Barclays’s wealth management operation had executed, and the names of the clients — so-called politically exposed persons (PEPs) — were so sensitive they were kept confidential, even inside the bank. Barclays stood to make a £50m profit on handling the cash.
    The Financial Conduct Authority (FCA) found that instead of conducting a thorough check on the clients, Barclays relaxed its assessments, breaching its own controls. As a result, the fine is the largest imposed for financial crime failings. It is the seventh penalty imposed on Barclays since 2009, bringing its penalty bill from the FCA and its predecessor, the Financial Services Authority, to nearly £500m.
    Britain’s biggest four banks have racked up almost £50bn in charges to cover fines and lawsuits since the 2008 financial crisis. The extraordinary bill for wrongdoing has spiralled as Royal Bank of Scotland, Lloyds and Barclays have announced they have set aside more money to pay for past sins.
    HSBC recently became the latest lender to make a huge provision. Europe’s biggest bank revealed it had put aside more than £900m in the first half of the year — including a fresh £500m provision to settle big fines in the US for rigging foreign exchange markets.
    The total set aside for wrongdoing by the big four banks in the first half of 2015 was £5.6bn. And that came on top of a report by ratings agency Standard & Poor’s which found the “Big Four” had racked up fines and charges of £42bn by the end of 2014.
    While these numbers sound huge and almost beyond imagination they are in reality token amounts and very small compared to the profits made by these gigantic financial institutions. Since 2008 the banks have collectively made over £200bn profit and have asset values of more than £100 trillion.
    Since the 1970s British banks in particular have undertaken mergers and takeovers resulting in a reduction in the number and diversity of banks. Foreign acquisitions and the de-regulation of financial markets in the 1980s have enabled them to become bloated, gigantic corporations and far too big to control internally or externally. Ensconced in luxury headquarters in the slick city of London they live in a different world, far removed from ordinary life.
    Trading teams are encouraged to break the rules in order to make profit, resulting in some spectacular failures and huge losses as more and more risks are taken in the pursuit of profit.
    As capitalism continues to stagger from crisis to crisis it is a fair bet that in the next few years more banking scandals will emerge and multi-billionaire individuals and companies will continue to dodge taxes. The cesspit at the beating heart of casino capitalism is the City of London and its banks. It is more important than ever to expose it.



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