The spoils of war

During AML training, I am often asked what happens to the money that is confiscated from criminals.  And occasionally – usually after a local conviction – a similar question will arise around institutional penalties.  When a regulator imposes a financial penalty on a firm for AML failings, where does that money go?  Recently Jersey announced that its regulator now has new powers to impose penalties of up to £4 million on naughty institutions, and in their press release they said that “the proceeds from the financial penalties will be used to reduce, or mitigate required increases in, the fees for regulated businesses; effectively ensuring that in the future, those companies that invest in compliance with Jersey’s regulatory standards will no longer have to carry the financial burden of dealing with those companies that fail to comply with regulatory standards”.

With larger settlements come other options.  Back in 2012, HSBC agreed to pay US$1.9 billion to the US government to settle allegations that the bank laundered money for Mexican drug cartels.  And the Department of the Treasury has now divvied up some of the money between twenty agencies that were involved in the investigation into HSBC.  The largest share of $116 million has been given to the district attorney’s office in Queens, New York, because one of its investigators – a former “beat cop” called Frankie D – was the first to notice the suspicious money flows in the bank’s accounts.  DA Richard Brown hopes to spend most of the money by converting into an office (if he gets planning permission) the Queens House of Detention, which sits next to the borough’s criminal courthouse; the jail is now largely empty and is often used as a movie set: “Every night when I go home from this office, pass by the Queens House and see seven or eight floors totally dark, I just say to myself, ‘What a perfect spot this is for our needs’.”  He has already splashed out on a cybercrime lab and a new telephone system.  Other recipients of the HSBC largesse include the Manhattan DA’s office ($76.9 million), the Port Authority of New York and New Jersey ($13.1 million) and the New York City police ($9.4 million).

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