The U.S. Justice Department’s stepped up anti-money laundering enforcement against big banks has picked up even more steam this week, and reportedly will be capped by a $1.9 billion settlement feds have reached with HSBC on money laundering charges over dealings with Iran and Mexican drug cartels.
State and federal prosecutors announced on December 10 a $327 million deal with Standard Chartered Bank over transactions with countries subject to U.S. sanctions. And as early as December 11, another much larger deal could be announced between federal and state authorities and HSBC, according to published reports. DOJ officials and a spokesman for the bank declined to comment on reports of the reportedly agreed-upon $1.9 billion HSBC fine.
“As we’ve previously disclosed in financial filings, we are cooperating with authorities in ongoing investigations,” an HSBC spokesman said. “The nature of any conversations is confidential.” A U.S. Senate report published in July criticized HSBC for, among other things, “systematically” altering transactions with sanctioned countries to avoid detection from U.S. regulatory authorities. Those countries and other entities HSBC has done business with, according to reports, include Iran and Mexican drug cartels.
New York-based Milberg partner Andrei Rado said that the settlements highlight the effort by the Justice Department to step up its anti-money laundering enforcement. “The way to get banks to care about anything is to put money on the line,” Rado said. “To fine a bank $1.9 billion gets their attention. They are giving it to banks where it hurts.”
Bank officers often agree to restructure or redouble compliance efforts to help appease enforcement officials, Rado said. HSBC announced Monday the appointment of Robert Werner to oversee the bank’s global financial crime compliance. Werner is a former head of the U.S. Treasury Department’s Office of Foreign Assets Control.
Werner, who joined the bank in August, will help create a “global financial intelligence unit,” according to a bank press release, to “conduct sensitive in-house investigations into potential regulatory breaches.”
The deal with Standard Chartered and reported HSBC agreement mark the latest in a series of prosecutions against banks over money-laundering violations. In a recent case, ING Bank N.V. of Amsterdam agreed in June to forfeit $619 million for its role in processing billions of dollars in transactions flowing from countries that included Iran and Cuba. Wachovia Bank agreed to a $160 million deal in 2010 after an investigation revealed hundreds of millions of dollars in drug proceeds were funneled through accounts at the bank.
The ING deal, DOJ officials said at the time, marked the largest-ever fine against a bank in connection with an investigation of violations of U.S. sanctions. Sullivan & Cromwell represented ING, and lawyers in the firm’s New York office also negotiated Standard Chartered’s deal.
Federal prosecutors filed a criminal information against Standard Chartered in U.S. District Court for the District of Columbia, charging the bank with one count of violating the International Emergency Economic Powers Act. The bank’s $327 million agreement settles forfeiture claims by DOJ and the New York state attorney general’s office.
“For years, Standard Chartered Bank deliberately violated U.S. laws governing transactions involving Sudan, Iran, and other countries subject to U.S. sanctions,” Assistant Attorney General Lanny Breuer of DOJ’s Criminal Division said in a statement. “The United States expects a minimum standard of behavior from all financial institutions that enjoy the benefits of the U.S. financial system. Standard Chartered’s conduct was flagrant and unacceptable.”
Samuel Seymour, the managing partner of Sullivan’s criminal defense and investigations group, represented the bank with litigation partner Nicolas Bourtin. Seymour and Bourtin are based in the firm’s New York office. Seymour declined to comment.
Standard Chartered said in a statement that “in the more than five years since the events giving rise to today’s settlements, the bank has completed a comprehensive review and upgraded of all of its compliance systems and procedures.” The bank said it has hired an independent consultant to assess the firm’s Bank Secrecy Act and anti-money laundering program.
Prosecutors said Standard Chartered processed more than $200 million in transactions through U.S. financial systems between 2001 and 2007 with countries subject to U.S. economic sanctions.
The bank “knowingly and willfully engaged in this criminal conduct,” prosecutors said, which caused U.S. institutions to process payments that would have been rejected, blocked or stopped for investigation by the U.S. Treasury Department’s Office of Foreign Assets Control.
The federal government will recommend the dismissal of the information against Standard Chartered in two years if the bank complies with the terms of the deferred prosecution agreement.
Ronald Machen Jr., the U.S. attorney for the District of Columbia, said in a statement that Standard Chartered concealed the bank’s transactions with sanctioned countries by removing references to those entities. “When banks dodge U.S. sanctions laws, they imperil our financial system and our national security,” Machen said.
Breuer in 2010 announced the creation of a special team of prosecutors in the Criminal Division’s asset forfeiture section dedicated to money laundering and bank integrity investigations. Trial attorney Clay Porter of the bank integrity unit, along with Assistant U.S. Attorney George Varghese of the National Security Section of the U.S. Attorney’s Office for the District of Columbia, participated in the case against Standard Chartered.
In a speech in October in London at a bribery and compliance forum, Breuer noted “there is plenty of corporate misconduct to keep prosecutors in the United States busy.” He noted, among other cases, the DOJ action against Credit Suisse, in 2009, in which the bank admitted to evading sanctions against Iran, Sudan, Cuba and other countries.
“We have ongoing investigations of several large financial institutions, and we have resolved cases against many others,” Breuer said in his remarks.
The U.S. Justice Department’s stepped up anti-money laundering enforcement against big banks has picked up even more steam this week, and reportedly will be capped by a $1.9 billion settlement feds have reached with HSBC on money laundering charges over dealings with Iran and Mexican drug cartels.
