Why did HSBC avoid indictment for laundering money linked to drug and terrorist organizations?

The HSBC case has been misunderstood by many. The short version is that whatever the US LEAs might charge HSBC with, other banks are equally guilty of doing it. A tangent analogy is prosecuting HSBC for jaywalking, when HSBC can point fingers at 100s of other banks for jaywalking too. There are literally 10,000s of 'small" infringements on AML, KYC and Money Laundering oversights by HSBC affiliate banks outside of US, for which HSBC United States (HBUS) has been involved in.

To be fair, HSBC is not the only bank to do so. Others banks with a large affiliate footprint for banking outside the US, are also cited and highlighted.

There is NO doubt, HSBC has been wrong on many account. If you read the report (mentioned below), it reads like a novel. The banking and monetary influence of Al-Rajhi Bank and the desperate need of HSBC to do business with them, that is what the report is all about. There are needless to say clear indication that US law was broke, but the report looks at the overall impact of Al-Rajhi's business and influence in the region, on which HSBC local managers in the Middle East pounced, because it meant extra (easy) income for the bank.

The fine is not a criminal one, had that truly been the case, criminal cases would have been filed by the Attorney General or by the District Attorneys in various cities against HSBC.

The fine is to teach HSBC and other banks a lesson, to strengthen their KYC, AML and Cross-Border Money business. HSBC just makes a classic example because of its large operating base outside the US and its customers who are wanting to do business via HSBC in the US (hence transactions routed via HBUS).

To better understand, you can read the report United States Senate, Permanent Subcommittee on Investigation, Committee on Homeland Security and Governmental Affairs. In particular, the Report "US Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History" (Can be downloaded from here: PSI report: U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History

You can also read this release by Senator Carl Levin's Office: Newsroom - Press Releases