US monitor says HSBC’s anti-money-laundering fixes leave ‘much work to be done’

PUBLISHED : Wednesday, 02 April, 2014, 3:51pm
UPDATED : Wednesday, 02 April, 2014, 5:08pm

HSBC has made some progress in improving its anti-money laundering programme, as required by a 2012 deferred prosecution agreement with the US Justice Department, but there remains “much work to be done”, federal prosecutors said in a court filing on Tuesday.

The British bank paid nearly US$2 billion in penalties in December 2012 to resolve charges that it failed to stop hundreds of millions of dollars in drug money from flowing through the bank from Mexico, and it promised to fix the problems.

The government had selected former New York prosecutor Michael Cherkasky to monitor HSBC’s compliance with the agreement. Tuesday’s report describes Cherkasky’s conclusions to date.

“Based on his initial review and subsequent conversations with the bank, the monitor believes that the leadership of HSBC Group is appropriately committed to addressing the bank’s long-standing compliance deficiencies,” the Justice Department said in the filing.

Cherkasky’s findings, which the filing said were made based on unverified information provided by HSBC, suggested the bank must improve the reliability of the data it gathers on its customers and the manner in which that information is shared among affiliates.

The independent monitor also found that HSBC must better integrate its various IT and transaction monitoring systems, the filing said.

It said Cherkasky, who hired dozens of experts to help him, found that many of the bank’s actions to correct anti-money-laundering deficiencies “did not begin in earnest until early 2013”, after it entered into the agreement.

HSBC reportedly disputed that finding and “maintains it did act promptly to begin remediation efforts prior to 2013”, the court document states.

More than two years prior to the agreement, an order by HSBC’s regulator, the Office of the Comptroller of the Currency, cited failures to properly police high-risk cash transactions and ordered anti-money-laundering improvements.

HSBC spokesman Rob Sherman declined to comment.