HSBC released from US deferred criminal charges

Bank has initially paid a US$1.9b fine in 2012 for failing to prevent Mexican cartels from laundering millions of dollars through its systems and also agreed a deferred agreement under which the US justice department could have imposed further penalties or begun criminal prosecution

PUBLISHED : Monday, 11 December, 2017, 6:49pm
UPDATED : Monday, 11 December, 2017, 10:59pm

HSBC has said it is being released from a 2012 agreement that allows it to avoid criminal charges in the US by the country’s Department of Justice for money laundering, following the expiration of the five-year deferred prosecution agreement (DPA) between the two parties.

The British registered bank paid a US$1.9 billion fine for failing to prevent Mexican cartels from laundering millions of dollars through its systems, and also agreed a DPA under which the justice department could have imposed further financial penalties on the bank, or begin criminal prosecution.

The justice department could also have extended the agreement for longer than the five years – but the fact it has now dismissed further action will come as a huge relief to the bank.

In a statement, HSBC said that the Department of Justice would file a motion with the US District Court for the Eastern District of New York seeking the dismissal of the charges deferred by the agreement.

“HSBC is pleased the Department of Justice has recognised HSBC’s progress in strengthening its anti-money laundering and sanctions compliance capabilities over the past five years,” the statement said.

It’s ‘winner takes all’ for banks that can get compliance right

HSBC said in 2012 it would take action to tighten and improve its policies against being used for money laundering.

“HSBC is working to ensure the reforms it has put in place are both effective and sustainable over the long-term, and, given the increasing sophistication of criminal networks that seek to circumvent banks’ controls, HSBC intends for its programme to evolve and improve further over time,” the statement added.

As part of the DPA, HSBC also had to have an independent compliance monitor in place to assess its anti-money laundering progress.

In its annual report for 2016, HSBC said the monitor, American lawyer Michael Cherkasky, felt there remained substantial challenges for HSBC to meet its goal of developing a “reasonably effective and sustainable AML and sanctions compliance programme”.

Following the monitor’s report, HSBC group chief executive Stuart Gulliver’s bonus for 2016 was reduced.

Gulliver is stepping down as chief executive, and will be replaced in February by John Flint, currently HSBC’s head of retail banking and wealth management.

Misconduct charges had been a major problem for HSBC throughout Gulliver’s time as chief executive.

Last month, its Swiss private banking unit was fined HK$400 million (US$51 million) by Hong Kong’s Securities and Futures Commission, for misconduct relating to the sale of structured products linked to now defunct US investment bank Lehman Brothers.

The fine was the largest ever levied by the SFC.

Also in November, HSBC paid €300 million (US$270 million) to settle a probe in France into its Swiss private banking unit, and in September, the bank was fined US$175 million by the US Federal Reserve for “unsafe and unsound practises” in its foreign exchange business.