HSBC wins approval of record US$1.9b money-laundering settlement

A federal judge has approved HSBC Holdings’ record US$1.92 billion settlement with federal and state investigators of charges that it flouted rules designed to stop money laundering and thwart transactions with countries under US sanctions.

While noting “heavy public criticism” of the settlement, which enabled HSBC to escape criminal prosecution, US District Judge John Gleeson in Brooklyn, New York, called the decision to approve the accord “easy, for it accomplishes a great deal.”

Gleeson ruled after more than six months of review, rejecting arguments by the US government and HSBC that federal judges lacked “inherent authority” over the approval or implementation of so-called “deferred prosecution agreements.”

The settlement, announced Dec. 11, last year, included a US$1.256 billion forfeiture and US$665 million in civil fines.

It resolved charges accusing HSBC of having degenerated into a “preferred financial institution” for Mexican and Colombian drug cartels, money launderers and other wrongdoers through what the US Department of Justice called “stunning failures of oversight.”

HSBC acknowledged compliance lapses, including a failure to maintain an effective anti-money laundering program, and conducting transactions on behalf of customers in Burma, Cuba, Iran, Libya and Sudan, which were all subject to US sanctions.

As part of the settlement, HSBC agreed to tie executive bonuses to meeting compliance standards, improve the internal sharing of information, and retain a compliance monitor.