Professor Bill Black warns that the UK is the 'epicentre' of global
Scottish News: UK 'epicentre' of the global fraud causing loss of 20 million jobs, says former regulator
The UK financial sector has been described by a former regulator as the global "epicentre" of fraud which caused the global financial crisis in 2008.
Professor Bill Black - a US lawyer, former regulator and expert criminologist has warned that through the deliberate destruction of financial regulation in a "race to the bottom" the UK has wreaked havoc on the world and that HSBC could be implicated if there is a war in Iran and a nuclear device is deployed.
In an interview focusing on fraud in the global financial system, Professor Black pointed to the UK's pivotal role. He said: "the epicentre of so many of these frauds ... Libor, HSBC, Standard Chartered and the whole mis-selling where they deliberately targeted the least sophisticated customers to rip them off to the tune of tens of billions of dollars and did so as a matter of absolute routine where when they do the reviews they find that over 70 percent of the [financial products] were sold improperly ... all of those things are happening in the City of London."
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The warning will set alarm bells ringing in Scotland where it has been proposed that an independent Scotland should continue to rely on the UK regulatory system which Finance Secretary John Swinney described as a "solid framework".
Mr Black explained that the financial crime wave across the UK led to the collapse of regulation across the developed world arguing that it was caused by a regulatory "race to the bottom". He explained that once regulation is "devastated" then there can be no criminal referrals and so no ability to prosecute financial crimes.
Black said: "The city of London 'won' the race to the [regulatory] bottom but that meant that everybody else in the race like the United States, like Ireland also ended up very close to the bottom and this was the mechanism which destroyed effective financial regulation throughout the developed world."
Prof Black went on to warn that as soon as regulation is destroyed then you have a "crimogenic environment" where incentives are so "perverse" that widespread crime is inevitable and pointed to British bank HSBC as an example.
Mr Black said: "you are looking at an underlying economic dynamic where fraud is a sure thing that will make people fabulously wealthy and where you select by your hiring, your promotion and by your firing the worst people ethically at these firms that are committing the frauds and so you have one of the largest banks in the world HSBC being the key ally to the most violent Mexican drug cartels ... where they actually did so much business together that the drug cartels designed special boxes - to put the cash in that they were laundering - that fit exactly into the teller windows so that there'd be no delay.
"So these banks figuratively have the blood of over a thousand people on their hands. They are willing to fund people that murder and torture and behead folks and are willing to do that year after year despite warnings from the regulators that they're [cartels] doing this and of course the regulators are not willing to take serious action until there's been true devastation."
This week it was revealed that British bankers are the wealthiest in the EU according to data published on Monday (15 July) by the bloc's banking watchdog. The data collected by the European Banking Authority (EBA), the EU agency that serves as the sector's watchdog, shows that 2,346 British-based bankers earned more than €1 million in 2011. The figure is more than three times as many as the 739 millionaire financiers across the rest of the EU combined and more than 10 times as many as Germany, second on the list, with 170.
In terms of sanctions, Mr Black pointed to the spectre of how HSBC's fraudulent practices could result in a war with nuclear capability and how the lack of effective regulation in the UK would be to blame: "HSBC and Standard Chartered, deliberately and massively, helped Iran escape the sanctions. So if Iran really is building a nuke and if it really does use that nuke ever or leads to a war to try to stop that nuke then that war or that use of the nuke is very much going to be on the heads of the banking industry as well."
Black sent a stark warning that the UK is heading up the race to the regulatory bottom again and points to London Mayor Boris Johnson role as cheerleader for the banking industry, saying " The Mayor of the City of London is going full force in terms of [winning] the competition on laxity again. So again, they've learned absolutely nothing from this [financial crisis] other than 'we get more tax revenues if the banks get bigger' so there can be no more pernicious doctrine on multiple levels."
Professor Black summed up by warning that corrupt banking executives must be prosecuted for financial crimes and the global damage they have caused.
Black said: "It's the definition of the crony capitalism when the crony capitalists and their political allies can do things with impunity. It's terrible for democracy, it's terrible for integrity but it's also terrible for the economy.
"They blew up the global economy, they caused over $10tn [£6.6tn] loss of wealth in the United States and over ten trillion dollar loss of wealth in Europe. They put directly out of jobs or prevented jobs being created for over 20 million people in America and the eurozone. The periphery of the eurozone is not simply back in recession it is in levels of unemployment that exceed the Great Depression."
In terms of a solution to the impasse Black pointed to political incentive to prosecute corrupt bankers. He said: "If you actually put the crooks in jail, you would be immensely popular."
You can here the full interview here.
As a regulator Prof Bill Black managed to effect over a thousand criminal prosecutions of CEOs and CFOs in the US resulting in imprisonment during the Savings and Loans Crisis of the late eighties.
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