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Banks fined for money laundering

By Marcie Geffner · Bankrate.com
Wednesday, December 12, 2012
Posted: 2 pm ET

Global banking giant HSBC has agreed to pay $1.9 billion to settle U.S. government charges of lax money-laundering compliance practices that allegedly violated the Bank Secrecy Act, BSA, and allowed hundreds of millions of dollars from Mexican drug-trafficking organizations to flow through U.S. bank accounts.

The settlement also resolves investigations by U.S. agencies into HSBC's apparent violations of transaction and sanction regulations involving Iran, Burma, Sudan, Cuba and Libya, according to the government.

The U.S. Treasury Department said in a statement that HSBC "failed to help secure the United States financial borders and left dangerous gaps that international drug dealers and other criminals readily abused."

Treasury also said the penalties reflected "the damage to the integrity of the U.S. financial system" and "the federal government's intolerance of behavior and business practices that disregard BSA requirements and U.S. sanctions regimes."

U.S. Treasury Under Secretary for Terrorism and Financial Intelligence David S. Cohen said HSBC knew the risks, but ignored specific obvious warnings.

The bank "did not and could not" reliably detect and report suspicious activity due to failures in its compliance practices, and these failures deprived law enforcement and regulators of critical information they needed to fight money laundering, terrorist finance, transnational organized crime and other domestic and global financial threats, the government said.

In addition to the payments, HSBC agreed to continue to cooperate with regulatory and law enforcement authorities and take further action to strengthen its compliance policies and procedures.

HSBC Group Chief Executive Stuart Gulliver said in a separate statement that HSBC accepted responsibility for its past mistakes, is "profoundly sorry" and has been "taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters."

Separately, the Treasury Department announced a combined $327 million settlement between U.S. government agencies and Standard Chartered Bank, a banking corporation that operates mainly in Asia, Africa and the Middle East.

This settlement resolves an investigation into apparent violations by the bank's London and Dubai offices of a number of U.S sanctions programs, including those relating to Iran, Burma, Libya and Sudan, and a case involving transactions related to the Foreign Narcotics Kingpin Sanctions Regulations, according to the government.

Adam J. Szubin, director of the Office of Foreign Assets Control with the Treasury Department, said the settlement was the result of an exhaustive interagency investigation.

The bank said in a separate statement that it had voluntarily reported its findings concerning past sanctions compliance to U.S. authorities and cooperated with regulators and prosecutors for nearly three years to resolve these problems. The bank also said it ceased its Iranian U.S. dollar payments business in late 2006 and stopped transacting any new business with Iranian entities in 2007, before such actions were required by U.S. authorities.

Follow me on Twitter: @marciegeff.

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