HSBC escapes prosecution as US ends 5-year deal

Bloomberg

HSBC Holdings Plc said its 5-year-old deferred prosecution agreement with Department of Justice has expired, signaling the US is satisfied with the bank’s improvements to its compliance systems after it was ensnared in a money-laundering scandal in Mexico.
The Justice Department will file a motion with a court in the Eastern District of New York seeking the dismissal of charges after HSBC “lived up to all of its commitments” to improve its anti-money laundering and sanctions compliance capabilities, the London-based bank said in a statement on Monday. Once dismissed, the bank can no longer be criminally prosecuted for the matter.
“HSBC is able to combat financial crime much more effectively today as the result of the significant reforms we have implemented over the last five
years,” Chief Executive Officer Stuart Gulliver said in the statement. The bank is working on “further improvement” to its
capabilities, he added.
HSBC has been under the supervision of an external monitor since 2012 when it paid a then-record $1.9 billion settlement for helping Mexican drug cartels launder money and breaching international sanctions by doing business with Iran. The lender pledged to cooperate with Justice Department probes for five years and by doing so was spared the stigma of a criminal record in the US — and the threat that it might lose access to some of its most lucrative institutional banking activities in the world’s largest economy.
Potential Charges
The monitor, Michael Cherkasky, had been considering a criminal charge against HSBC related to conduct on its foreign-exchange desk after
two staff were accused of
improper trading, Bloomberg News reported last year. That could have potentially voided the DPA deal, but Cherkasky
ultimately decided not to act.
Still, the lender was fined $175 million by the Federal
Reserve after the probe found that traders had been front-
running client orders, shar-
ing confidential customer details with dealers at other fi-
rms and attempting to rig
currency benchmarks.
Its former chief trader Mark Johnson was found guilty of fraud in Brooklyn,
New York in October.
HSBC has also been shuttering accounts associated with South Africa’s powerful Gupta family as it assesses its exposure to
the scandal gripping the country. UK regulators have said
they are looking into whe-
ther HSBC and Standard Chartered Plc facilitated money-
laundering as a result of possible ties to the Guptas after a British politician warned illicit funds may have passed through the Hong Kong, where the banks have had large footprints.
The recent scandals are a reminder of the potential challenges for new Chairman Mark Tucker, who started in October, and John Flint, who is preparing to take over from CEO Gulliver when he retires in February.
HSBC has spent billions of dollars on new technology and built up its compliance workforce to more than 6,000 people worldwide to comply with the demands of the monitor. The end of the DPA illustrates the progress made by the bank. In a report covering an earlier period of monitorship, Cherkasky said there had been resistance from senior managers at the
US investment bank, whom he accused of bullying, foot-dragging and the discrediting of his in-house watchdogs.