How The West Was Bought

The current outbreak of bank scandals raises a big question: Why can’t the European Union police itself?

- Howard Chua-Eoan and Pat Regnier

The dirty money scandals pouring out of Europe may seem like déjà vu. A crackdown on illicit cash made a big splash in the first half of this decade: HSBC Holdings Plc was fined $1.9 billion in 2012 for handling funds from drug traffickers, terror groups, and Washington-sanctioned nations such as Iran; in 2014, BNP Paribas SA had to pay almost $9 billion for dealing with Iran and other countries deemed pariahs by the U.S., such as Cuba and Sudan; and in 2015, Commerzbank AG had to hand over $1.45 billion in fines to U.S. regulators for processing transactions with some of those same countries. It’s practically taken for granted that there’s always someone somewhere trying to make ill-gotten wealth look innocent by sneaking it through legitimate companies and banks. So why should it be such a shock that a bunch of Nordic banks appear to have been caught handling suspicious Russian money?

Russians hold about $1 trillion outside their home country, according to both Bloomberg Economics and a 2017 study by economists Filip Novokmet, Thomas Piketty, and Gabriel Zucman that cited the U.K., Switzerland, and Cyprus among centers of funds. It’s such an open secret that until the current revelations, relatively few Europeans seemed perturbed by that money coursing through their financial systems and real estate markets. Certainly not enough to push for real reform—although its impact was obvious in rental costs and restaurant prices in London neighborhoods such as Knightsbridge and Mayfair.