Criminal charges against the HSBC have been deferred by the U.S. Justice Department five years since the financial institution was slapped with fines over breaching sanctions and money laundering. A motion by the Justice Department will then be filed in the courts to have the charges dismissed.
A deferred prosecution deal was entered into by the bank exactly five years ago and the agreement required HSBC to raise standards with regards to its anti-money-laundering measures. During that period had the bank committed similar offences there was a risk that the U.S. Justice Department would have had the criminal case reopened. According to HSBC, the bank had met all the conditions. Previously the Justice Department has extended a deferred prosecution agreement twice and this was in the case of Standard Chartered.
Money laundering and violation of sanctions
The criminal offences that HSBC was accused of committing include assisting drug cartels in Mexico to launder money. HSBC was also accused of transacting with countries that were under sanctions imposed by the United States including Sudan, Libya and Iran. For these violations HSBC was fined approximately $1.9 billion.
Following the deferment approximately $8 billion in trapped capital that the HSBC was forced to keep in the U.S will be returned. The amount is likely to be used in extending a stock buyback program.
Financial crime risk division
The deferment will be seen as a victory for Douglas Flint, the former chairman of the bank and Stuart Gulliver, the chief executive officer who is set to leave in February next year. The two made the cleaning up of HSBC’s sanctions and anti-money-laundering controls their priority and consequently invested over $1 billion in compliance technology. They also created a unit which dealt exclusively with financial crime risk and employed over 7,000 members of staff.
“We took the decision to apply US level standards across the entire bank, which we didn’t have to do, but it is clearly one of the reasons why the DoJ agreed to do a DPA rather than prosecute us,” HSBC’s chief legal officer, Stuart Levey, said.
Still HSBC had some run-ins with regulators though most of the issues had occurred prior to the DPA. This year for instance HSBC’s former forex trading global head, Mark Johnson, was convicted in the United States for having defrauded a client six years ago. The bank has also been accused by a British peer of having assisted South Africa’s Gupta family to launder money in Africa’s most advanced economy.