British bank HSBC has agreed to pay $1.9 billion in forfeitures and penalties, authorities announced in Brooklyn yesterday, but it has avoided criminal prosecution in connection with the laundering of $881 million from narcotics traffickers in Mexico and for allowing prohibited transactions with Libya, Iran, Burma, Sudan and Cuba.
Lanny Breuer, assistant attorney general for the U.S. Justice Department's Criminal Division, said during a press conference at the Eastern District U.S. Attorney's Office that the bank was being held responsible "for a stunning failure of oversight and worse."
In papers filed in Eastern District federal court, HSBC admitted it had violated the Bank Secrecy Act, International Emergency Economic Powers Act and the Trading With the Enemy Act.
Read the deferred prosecution agreement [PDF] and the statement of facts [PDF].
The bank entered into a five-year deferred prosecution agreement with the Justice Department and a two-year agreement with the Manhattan District Attorney's Office. The Justice Department and the Manhattan D.A.'s office will share $375 million from the settlement to penalize the bank for acts including removing information from transactions that would have disclosed the bank's dealing with sanctioned foreign nations.
"The record of dysfunction that prevailed in HSBC was simply astonishing," Breuer said at the press conference, noting the $1.256 billion it will return was "by far the largest forfeiture ever in a case involving a bank."
HSBC will also pay $665 million in civil penalties and be forced to implement, or continue efforts already under way, to prevent future problems. For example, the bank has already "clawed back" bonuses for some executives whose job it is to head off money laundering and significantly increased the staff assigned to ensuring compliance with federal regulations.
Eastern District U.S. Attorney Loretta Lynch said at the press conference that HSBC had "cooperated immediately and extensively" with the investigation and its cooperation and remediation efforts were a "significant factor" in deferring criminal prosecution of the bank or its officials.
Breuer faced a number of tough questions on that decision.
He said the Justice Department had to weigh HSBC's cooperation in the probe, the conduct in question and "collateral consequences" of an indictment that might include driving the bank out of business when determining whether to proceed with the criminal case.
"The goal is not to bring HSBC down," said Breuer, adding that the department meant to avoid the loss of jobs and "systemic" harm to the economy.
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