HSBC Judge Approves $1.9B Drug-Money Laundering AccordChristie Smythe
HSBC Holdings Plc’s $1.9 billion agreement with the U.S. to resolve charges it enabled Latin American drug cartels to launder billions of dollars was approved by a federal judge.
U.S. District Judge John Gleeson in Brooklyn, New York, signed off yesterday on a deferred-prosecution agreement, a critical component of the London-based bank’s settlement. Gleeson said in his order that he was exercising “supervisory power” over the deal even though the bank and government contended he didn’t have authority to approve or deny it.
“A pending criminal case is not window dressing” Gleeson wrote, noting that the case was filed and would remain pending for five years under the agreement. “By placing a criminal matter on the docket of a federal court, the parties have subjected their DPA to the legitimate exercise of the court’s authority.”
HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering, prosecutors said. The bank also violated U.S. economic sanctions against Iran, Libya, Sudan, Burma and Cuba, according to a criminal information filed in the case.
The bank, Europe’s largest, agreed to pay a $1.25 billion forfeiture and $665 million in civil penalties under the settlement, prosecutors announced in December. At a hearing the same month, Gleeson told prosecutors there had been “publicized criticism” of the agreement, which lets the bank and management avoid further criminal proceedings over the charges.
Gleeson said he will continue supervising implementation of the deal, under which the bank agreed not to contest criminal charges of failing to maintain an effective anti-money-laundering program, failing to conduct due diligence, and violating the Trading With the Enemy Act and the International Emergency Economic Powers Act.
Lack of proper controls allowed the Sinaloa drug cartel in Mexico and the Norte del Valle cartel in Colombia to move more than $881 million through HSBC’s U.S. unit from 2006 to 2010, the government alleged in the case. The bank also cut resources for its anti-money-laundering programs to “cut costs and increase profits,” the government said in court filings.
Under a deferred prosecution agreement, the U.S. allows a target to avoid charges by meeting certain conditions -- including the payment of fines or penalties -- and by committing to specific reforms.
In his order, Gleeson called the terms of the HSBC agreement, including the forfeiture and the bank’s admission of wrongdoing, “significant.”
“Indeed, taking into account the fact that a company cannot be imprisoned, it appears to me that much of what might have been accomplished by a criminal conviction has been agreed to in the DPA,” Gleeson wrote.
HSBC spokesman Rob Sherman said in an e-mailed statement that the bank remains focused on implementing the conditions of the agreement.
“Since 2011, we have taken extensive actions to put in place the highest standards to protect against current and emerging threats from financial crime,” Sherman said. “While we are making good progress, there is much more to do, and ensuring the highest standards wherever we do business is an ongoing process.”
Christina B. Dugger, First Assistant U.S. Attorney in Brooklyn, declined to comment on Gleeson’s decision.
Several people filed letters to the judge asking him not to approve the deal, including actress Berenice Mosca, who said she appeared in television advertisements for the bank and hasn’t been paid.
“To amend any part I played in contributing to HSBC profits, I feel responsible for motivating HSBC to right their wrongs, their illicit, horrible way they use those profits,” she said in the letter, filed March 20. “Respectfully I ask, please do not approve this grossly inadequate settlement offer.”
The case is U.S. v. HSBC Bank USA NA, 12-cr-00763, U.S. District Court, Eastern District of New York (Brooklyn).