by Jonathan Stempel
July 2, 2013
Reporting by Jonathan Stempel
in New York; Additional reporting by Brett Wolf;
Editing by Jan Paschal
HSBC wins OK of record
$1.92 billion money-laundering
A federal judge has approved HSBC Holdings Plc's record $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 U.S. sanctions.
While noting "heavy public criticism" of the settlement, which enabled HSBC
to escape criminal prosecution, U.S. District Judge John Gleeson in
Brooklyn, New York, called the decision to approve the accord,
"easy, for it accomplishes a great deal."
Gleeson ruled on Monday after more than six
months of review, rejecting arguments by the U.S. government and HSBC that
federal judges lacked "inherent authority" over the approval or
implementation of so-called "deferred prosecution agreements."
The settlement, announced December 11, 2012, included a $1.256 billion
forfeiture and $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 U.S. 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,
...which were all subject to 'U.S. 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.
The latter role is being filled by Michael Cherkasky, a former
prosecutor for the Manhattan district attorney and former chairman of the
New York State Commission on Public Integrity.
JUDGE "NOT A POTTED
HSBC's $1.92 billion payout was the largest U.S. penalty against a bank,
topping a $780 million penalty imposed in 2009 against Swiss bank UBS AG for
aiding tax evasion.
A spokesman, Rob Sherman, said HSBC has since 2011 taken "extensive"
steps to help thwart financial crime.
"While we are making good progress, there is
much more to do," he said.
A spokeswoman for U.S. Attorney Loretta Lynch
in Brooklyn declined to comment.
The deferred prosecution agreement, known as a DPA, lasts for five years,
and prosecutors may indict the bank if it violates the terms.
"much of what might have been accomplished
by a criminal conviction has been agreed to in the DPA," whose
administration he will supervise.
He noted having received requests from the
public to reject the agreement because it did not hold HSBC criminally
liable. He also read numerous editorials and columns suggesting, as one put
it, that HSBC was "too big to indict."
Gleeson, nonetheless, said "significant deference" was owed to the Obama
administration in deciding not to press an indictment.
"A pending federal criminal case is not
window dressing. Nor is the court, to borrow a famous phrase, a potted
plant," he wrote.
"As long as the government asks the court to
keep this criminal case on its docket, the court retains the authority
to ensure that the implementation of the DPA remains within the bounds
of lawfulness and respects the integrity of this court."
The case is 'U.S. v. HSBC Bank USA NA et al,'
U.S. District Court, Eastern District of New York,