HSBC To Pay $1.256 Billion In Fines To Resolve Money Laundering Allegations
On December 11, 2012, HSBC Bank USA and HSBC Holdings plc agreed to pay $1.256 billion as part of a deferred prosecution agreement (DPA) with the U.S. Department of Justice (DOJ) to resolve alleged violations of the Bank Secrecy Act, International Emergency Economic Powers Act, and the Trading with the Enemy Act. As part of the DPA, HSBC consented to the filing of a four-count felony criminal information in the Eastern District of New York alleging that HSBC Bank USA and HSBC Holdings plc willfully failed to maintain an effective anti-money laundering (AML) program and willfully failed to conduct due diligence on foreign affiliates. The government also alleges that HSBC violated U.S. law by illegally conducting transactions on behalf of customers in Iran, Libya, Sudan, Burma, and Cuba, all of which are subject to sanctions enforced by the Office of Foreign Assets Control, a branch of the U.S. Department of the Treasury. The criminal information can be found here.
The DPA, which can be found here, requires HSBC to pursue and enhance its AML obligations, as well as other compliance efforts, within its global operations to prevent future money laundering attempts. The agreement establishes a five year period during which HSBC will be subject to the scrutiny of an independent corporate compliance monitor retained by HSBC and approved by DOJ. HSBC has already made significant changes in its management structure and AML compliance functions to increase accountability of its senior executives for AML compliance failures. Aside from the $1.256 billion fine mandated under the deferred prosecution agreement, HSBC has agreed to pay $500 million to the Office of the Comptroller of the Currency and $165 million to the Federal Reserve in civil forfeitures.