Long story short, I came across this video which explains how a letter from UK's Treasury Chancellor to the chairman of the US Federal Reserve and US Tresury Secretary was enough to stop US Department of Justice from prosecuting UK's HSBC bank or its employees. So who is USA's boss? It's UK, or rather the British Monarchy.
Let me cover the nearly one hour video in short:
Four year since the 2007-8 financial crisis, no big bank had been prosecuted by US Dept of Justice (DOJ) citing lack of evidence. But in 2012, with HSBC Bank they finally had evidence in form of confession. There was evidence on four counts. Two counts of violating Banking Secrecy Act, violation of International Emergency Economic Powers Act, and violation of Trading With The Enemy Act. But instead of winning the biggest criminal trial in US history, DOJ settled with the bank citing horrible collateral consequences of prosecuting. Same excuse was repeated one week later in another uncontested criminal case. DoJ claimed it has consulted outside experts to know what could be the consequences of their actions. They also did not prosecute individual bankers even after they had left HSBC. That should not have any collateral damages.
What actually happened was that international immunities were enforced contradicting the US law.
In OFAC's (Office of Foreign Assets Control) weekly inter-agency call the DOJ stated that it was considering a guilty plea from HSBC. London's FSA (Financial Services Authority) was also present in this call. FSA alerted Her Majesty's (British Monarch's) Treasury Chancellor George Osborne. Osborne promptly wrote a letter to US Federal Reserve Chairman Ben Bernanke and US Treasury Secretary Tim Geithner on September 10 2012. The letter was written on Crown's (British Monarchy) letterhead. The letter warned that prosecuting a "systematically important bank" like HSBC could lead to "financial contagion" and pose very serious implications for financial and economic stability, particularly in Europe and Asia. So prosecutors met with HSBC and offered Deferred Prosecution Agreement (DPA). In the final DPA also the DOJ gave huge concessions such as insulating HSBC and its employees, officers and directors from prosecution, allowing executives to get their bonuses despite failing to meet compliance standards.
George Osborne's letter wasn't friendly advice but an order, threat and ransom to Ben Bernanke and Tim Geithner to intercede on its behalf as he was doing himself. In nice words it threatened global instability at least four times. Every concession to HSBC in final settlement comes from that order. The order is thinly disguised as chumminess. The key sentences are
"It is for you and your partners in other departments and agencies to decide how best to supervise, regulate and enforce compliance within your jurisdiction. And Adiar Turner, Mervyn King and I are together committed to ensuring that UK financial institutions are fully compliant with global standards and rules."
So as per the letter, jurisdiction of UK's HSBC bank was with UK officials and not the US where it operated and committed crimes. What global rules and standards did they mean? The big hint comes from the phrase "systematically important financial institution" for HSBC. Less than a year before Osborne's letter, the Financial Stability Bard (FSB) in the Bank for International Settlements (BIS) published for the first time a list of banks with this exact title. It was the only global entity to use this phrase. HSBC appeared on the 2011 list, while Standard Chartered Bank (SCB) was not there. That's why UK's FSA was in the meeting regarding HSBC but not regarding another big UK bank like SCB.
Another hint comes from FSB membership list. It's Anglo American membership was as follows:
United Kingdom:
- Bank of England, whose governor was Mervyn King
- Financial Services Authority whose chairman was Adiar Turner.
- Her Majesty's Treasury whose Chancellor was George Osborne.
United States:
- Board of Governors of the Federal Reserve System whose chairman was Ben Bernanke.
- US Securities and Exchange Commission
- US Department of Treasury whose secretary was Tim Geithner
The inclusion of these five names in the letter also shows that the letter referred to the FSB.
One of FSB's mandate was to assess vulnerabilities affecting global financial system as well as to identify and review regulatory, supervisory and related actions needed to address these vulnerabilities and their outcomes. That's is exactly what Osborne's letter did. He was supervising the outcome of HSBC case. This is what FSB is about: Using global rules to supersede national laws. As to why enforcement of global rules fell upon British officials and not American, the 2012 Annual Report of BIS notes that FSB has a Standing Committee on Supervisory & Regulatory Co-operation chaired by Adiar Turner, chairman of the UK financial services authority. This again explains why UK's FSA was in a meeting involving US's DOJ and agencies.
FSB operates under BIS. The various immunities granted to HSBC in the final DPA of DOJ are due to various immunities in BIS Headquarters Agreement, such as immunity from jurisdiction and execution, immunity to bank's documents from disclosure, immunity of assets from seizure, attachment or freeze, immunity from prosecution for officials during as well as after they stopped being officials of the bank.
So you see through the FSB arrangement, Her Majesty's Treasury Chancellor was able to prevent prosecution of HSBC bank and its employees. He could order around the chairman of Federal Reserve, as well as secretary of US Dept of Treasury and stop US Department of Justice from prosecuting HSBC and its employees or ex-employees. So who is the boss? Her Majesty, British Monarch Elizabeth II.