Once again, Senator Elizabeth Warren asks the most obvious question -- why aren't banks prosecuted? -- only to get the same incredulous responses. What? Prosecute the banks? No way!

Warren took bank regulators to task on Thursday about the fact that British bank HSBC is still doing business in the U.S., with no criminal charges filed against it, despite confessing to what one regulator called "egregious" money laundering violations.

The Justice Department’s record $1.9 billion settlement with HSBC exposed the continuing ability of drug cartels, rogue nations and terrorist financiers to move billions of dollars through the international and U.S. banking systems.

Money laundering was a major focus of U.S. counterterrorism policy after the Sept. 11, 2001, attacks. The Patriot Act of 2002 included provisions that required the Treasury Department to identify banks and individuals suspected of links to terrorism. And the law instructed banks to strictly monitor and report potentially illegal transactions.

"They did it over and over and over again across a period of years. And they were caught doing it, warned not to do it and kept right on doing it, and evidently making profits doing it," Warren said of HSBC. "How many billions of dollars do you have to launder for drug lords and how many economic sanctions do you have to violate before someone will consider shutting down a financial institution like this?"

The regulator she was questioning, David Cohen, the Treasury Department's undersecretary for terrorism and financial intelligence, repeatedly refused to answer the question. Like other regulators at the hearing, he said that his department has no authority to shut down a bank unless the Justice Department convicts the bank of a crime.

Warren said: “If you’re caught with an ounce of cocaine, chances are good you’re going to go to jail. If it happens repeatedly, you may go to jail for the rest of your life. But evidentially, if you laundered nearly a billion dollars for drug cartels and violated our international sanctions, your company pays a fine and you go home and sleep in your own bed at night -- every single individual associated with this. And I just -- I think that’s fundamentally wrong.”

The issue is part of a broader debate over large financial institutions and whether they are too big to be broken up. The Massachusetts senator’s comments come after U.S. Attorney General Eric Holder acknowledged Wednesday that some of the largest banks are too big to prosecute and that prosecution could have a negative impact on the U.S. and global economies.

Speaking before a Senate Judiciary Committee hearing, Holder said he is concerned that the size of some of these institutions “becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.”

Holder added that “I think that is a function of the fact that some of these institutions have become too large.”

It is far past time for someone to "indicate" to Mr. Holder that he needs to prosecute the criminal banks, or someone will show him to the door.

United States Senator Charles Grassley (R - Iowa) and Bloomberg Contributing Editor Neil Barofsky talk with Bloomberg Law's Lee Pacchia about HSBC's recent settlement with US authorities over claims the bank engaged in money laundering for drug cartels and terrorist organizations. Senator Grassley is the ranking Republican on the Senate Judiciary Committee.

In a letter to Attorney General Eric H. Holder Jr., Sen. Chuck Grassley of Iowa complained that the Justice Department -- in accepting a $1.92 billion settlement in a money-laundering probe by federal and state authorities in the United States -- had not prosecuted a single HSBC employee, “no executives, no directors, no AML [anti-money laundering] compliance staff members, no one.”

“Even more concerning is the fact that the individuals responsible for these failures are not being held accountable,” he wrote. “By allowing these individuals to walk away without any real punishment, the department is declaring that crime actually does pay. Functionally, HSBC has quite literally purchased a get-out-of-jail-free card for its employees for the price of $1.92 billion dollars.”

HSBC's Money Laundering Lapses, By the Numbers

by Cora Currier ProPublica, July 20, 2012

This week a Senate investigation detailed that HSBC had lax controls against money-laundering and often ignored warnings about clients with ties to drug cartels and terrorists.

The bank is also reportedly nearing a settlement with the Justice Department, which has two criminal investigations into whether HSBC was complicit in money-laundering and tax evasion.The federal regulator that should have been keeping tabs on all this, the Office of the Comptroller of the Currency, also came under fire for "systemic weaknesses" in its oversight of banks' anti-money laundering procedures.

The report reaches back more than a decade, and in testimony in front of the Senate this week, the bank apologized and vowed it has recently overhauled its anti-money-laundering efforts. The bank's head of compliance stepped down this week. But the Senate report notes that HBSC made similar promises of reform back in 2003 when it was cited by regulators for poor oversight of suspicious transactions. HSBC declined to comment further on the report or on the DOJ's ongoing investigation.

There are lot of blunders and blind spots detailed in the Senate's 335-page takedown. Here's a rundown2014in each instance, we've linked to the relevant page in the report.

17,000: The backlog of unreviewed, potentially suspicious activity alerts at HSBC's U.S. arm as uncovered by government regulators in 2010.

200: Number of compliance staff in bank's U.S. branch between 2006 and 2009, of which a smaller group was charged with making sure the bank was following anti-money-laundering rules. HBUS had millions of accounts, and more than 16,000 employees overall, and according to the report, kept compliance staff small as a cost-cutting measure.Members of the anti-money-laundering group told investigators that understaffing was a key problem.

85: Number of problems with the anti-money-laundering efforts at bank's U.S. arm red-flagged by the OCC between 2005 and 2010. That was a third more than the next-closest major bank.

0: number of enforcement actions the OCC took in that time period.

3: number of years, from 2006 to 2009, for which HSBC's U.S. branch didn't do any money-laundering monitoring for transactions with HSBC banks in other countries.

15 billion: Total value of U.S. dollar bills (as in paper money) the bank accepted as part of bulk-cash transactions from foreign HSBC banks during that period, with no anti money-laundering controls.

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