HSBC might pay $1.8-bn money laundering fine

Last Updated: Fri, Dec 07, 2012 07:41 hrs

pHSBC Holdings Plc might pay a fine of 18 billion as part of a settlement with US law-enforcement agencies over money-laundering lapses according to several people familiar with the matterppThe settlement with Europes biggest bank &mdash which could be announced as soon as next week &mdash will likely involve HSBC entering into a deferred prosecution agreement with federal prosecutors said the sources who spoke on condition of anonymity The potential settlement which has been in the works for months is emerging as a test case for just how big a signal US prosecutors want to send to try to halt illicit flows of money moving through US banksppAn HSBC spokesman said "We are cooperating with authorities in ongoing investigations The nature of discussions is confidential"ppHSBC said on November 5 that it set aside 15 billion to cover a potential fine for breaching anti-money laundering controls in Mexico and other violations although Chief Executive Stuart Gulliver said the cost could be "significantly higherppIn regulatory filings HSBC has said it could face criminal charges But similar US investigations have culminated in deferred prosecution deals where law-enforcement agencies delay or forgo prosecuting a company if it admits wrongdoing pays a fine and agrees to clean up its compliance systems If the company missteps again the Justice Department could prosecuteppA deferred prosecution agreement could raise questions over whether HSBC is simply paying a big fine and nothing more said Jimmy Gurule a former enforcement official at the US TreasuryppIt would make a "mockery of the criminal justice system" said Gurule who is now a University of Notre Dame law-school professorppIn his view the only way to really catch the attention of banks is to indict individualspp"That would send a shockwave through the international finance services community" Gurule said "It would put the fear of God in bank officials that knowingly disregard the law"ppAn HSBC settlement long rumored has been slow in coming Inside the Justice Department prosecutors in Washington DC and West Virginia argued over how to best investigate HSBC According to documents reviewed by Reuters the US Attorneys office in Wheeling West Virginia was prepared as far back as 2010 to indict HSBC and include more than 170 money laundering counts Prosecutors in Washington ultimately took chargeppIn July the US Senate Permanent Subcommittee on Investigations released a report saying HSBC allowed clients to move shadowy funds from Mexico Iran the Cayman Islands Saudi Arabia and SyriappThe use of deferred prosecution agreements has surged in recent years because Justice Department officials believe they give prosecutors an option aside from indicting a company or dropping a caseppAccording to a report in May by the Manhattan Institute for Policy Research a conservative-leaning think tank there have been 207 deferred or non-prosecution agreements since 2004ppThe agreements "have become a mainstay of white collar criminal law enforcement" US Assistant Attorney General Lanny Breuer said in September during an appearance at the New York City Bar Associationpp"Ive heard people criticise them and Ive heard people praise them DPAs have had a truly transformative effect on particular companies and more generally on corporate culture across the globe"ppIf US prosecutors agree to a deferred agreement they still could wield a powerful legal tool by accusing the bank of laundering moneyppThat would be a much more serious charge than if prosecutors in a deferred agreement charged HSBC with criminal violations of the Bank Secrecy Act a law that requires banks to maintain programmes that root out suspicious transactionsppIn March 2010 for example Wells Fargo & Cos Wachovia entered into a deferred prosecution agreement to pay 160 million as part of a Justice Department probe that examined how drug traffickers moved money through the bank Wachovia was accused of violating the Bank Secrecy Act a decision that prompted criticism from some observers who thought a money laundering charge should have been employed and individual bankers prosecutedppA charge of money laundering would be a rare move by the Justice Department and would send a signal to other big banks that the agency is intent on cracking down on dirty money moving through the US financial systemp

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