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HSBC comes up short in money laundering vigilance, U.S. says

Fri, 1st Apr 2016 20:09


By Jonathan Stempel

NEW YORK, April 1 (Reuters) - HSBC Holdings Plc has not done enough to thwart money laundering, despite making significant progress since reaching a landmark 2012 anti-money-laundering settlement with U.S. prosecutors, a federal monitor has found.

The monitor "remains unable to certify that the bank's compliance program is reasonably designed and implemented to detect and prevent violations of AML and sanctions laws," U.S. Attorney Robert Capers in Brooklyn, New York said in a letter filed on Friday with the federal court there.

"Although HSBC made significant progress last year, the monitor believes that the bank continues to face significant challenges," Capers added.

The London-based bank has spent three years upgrading its oversight of customer transactions, after reaching a $1.92 billion settlement of U.S. Department of Justice charges tied to money laundering.

Prosecutors said HSBC failed to spot suspicious activity related to Mexican and Colombian drug cartels, and handled transactions for customers in countries subject to U.S. sanctions, such as Myanmar, Cuba and Iran.

As part of the settlement, HSBC entered a five-year deferred prosecution agreement and agreed to monitoring by Michael Cherkasky, the executive chairman of compliance firm Exiger and a former prosecutor.

The Justice Department could prosecute HSBC or extend the monitoring if the bank fails to live up to its commitments.

"HSBC remains focused on fulfilling its obligations under the DPA and implementing the most effective standards globally to combat financial crime," bank spokesman Rob Sherman said.

According to Capers, Cherkasky found that HSBC in 2015 made "commendable progress" toward improving oversight, spending more than $680 million and adding 2,584 compliance personnel, and was "especially complimentary of HSBC's 'tone at the top.'"

But Cherkasky also found that HSBC's monitoring and testing capabilities suffer from "immaturity," and affiliates in some countries have struggled to obtain information about customers when opening accounts or updating account profiles, Capers said.

The monitor also believes "a great deal of work remains to be done" in improving technology, Capers said, and flagged instances where computer deficiencies left HSBC short of data needed to help detect high-risk transactions.

Cherkasky declined to comment.

His reports have been filed under seal with the Brooklyn court. HSBC and the Justice Department have appealed an order by U.S. District Judge John Gleeson to make his work public.

Gleeson left the bench last month for private practice. U.S. District Judge Ann Donnelly now oversees the HSBC case.

The case is U.S. v. HSBC Bank USA NA et al, U.S. District Court, Eastern District of New York, No. 12-cr-00763. (Reporting by Jonathan Stempel in New York; Editing by Steve Orlofsky)



(c) Copyright Thomson Reuters 2016. Click For Restrictions - http://about.reuters.com/fulllegal.asp


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