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* HSBC avoided criminal prosecution through settlement
* Judge acknowledged public dissatisfaction with accord
* HSBC says bolstering oversight, has more to do
By Jonathan Stempel
July 2 (Reuters) - A federal judge has approved HSBCHoldings Plc's record $1.92 billion settlementwith federal and state investigators of charges that it floutedrules designed to stop money laundering and thwart transactionswith countries under U.S. sanctions.
While noting "heavy public criticism" of the settlement,which enabled HSBC to escape criminal prosecution, U.S. DistrictJudge John Gleeson in Brooklyn, New York, called the decision toapprove the accord "easy, for it accomplishes a great deal."
Gleeson ruled on Monday after more than six months ofreview, rejecting arguments by the U.S. government and HSBC thatfederal judges lacked "inherent authority" over the approval orimplementation of so-called "deferred prosecution agreements."
The settlement, announced Dec. 11, 2012, included a $1.256billion forfeiture and $665 million in civil fines.
It resolved charges accusing HSBC of having degenerated intoa "preferred financial institution" for Mexican and Colombiandrug cartels, money launderers and other wrongdoers through whatthe U.S. Department of Justice called "stunning failures ofoversight."
HSBC acknowledged compliance lapses, including a failure tomaintain an effective anti-money laundering program, andconducting transactions on behalf of customers in Burma, Cuba,Iran, Libya and Sudan, which were all subject to U.S. sanctions.
As part of the settlement, HSBC agreed to tie executivebonuses to meeting compliance standards, improve the internalsharing of information, and retain a compliance monitor.
The latter role is being filled by Michael Cherkasky, aformer prosecutor for the Manhattan district attorney and formerchairman of the New York State Commission on Public Integrity.
JUDGE "NOT A POTTED PLANT"
HSBC's $1.92 billion payout was the largest U.S. penaltyagainst a bank, topping a $780 million penalty imposed in 2009against Swiss bank UBS AG for aiding taxevasion.
A spokesman, Rob Sherman, said HSBC has since 2011 taken"extensive" steps to help thwart financial crime.
"While we are making good progress, there is much more todo," he said.
A spokeswoman for U.S. Attorney Loretta Lynch in Brooklyndeclined to comment.
The deferred prosecution agreement, known as a DPA, lastsfor five years, and prosecutors may indict the bank if itviolates the terms.
Gleeson said "much of what might have been accomplished by acriminal conviction has been agreed to in the DPA," whoseadministration he will supervise.
He noted having received requests from the public to rejectthe agreement because it did not hold HSBC criminally liable. Healso read numerous editorials and columns suggesting, as one putit, that HSBC was "too big to indict."
Gleeson, nonetheless, said "significant deference" was owedto the Obama administration in deciding not to press anindictment.
"A pending federal criminal case is not window dressing. Noris the court, to borrow a famous phrase, a potted plant," hewrote. "As long as the government asks the court to keep thiscriminal case on its docket, the court retains the authority toensure that the implementation of the DPA remains within thebounds of lawfulness and respects the integrity of this court."
The case is U.S. v. HSBC Bank USA NA et al, U.S. DistrictCourt, Eastern District of New York, No. 12-cr-00763.
