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HSBC Money Laundering Ties
February 28, 2012
[ by Melanie Gretchen ]
London-based HSBC faces possible criminal or civil charges after an investigation established possible bank ties to alleged money laundering transactions, some of which were tied to Iran, according to an SEC filing on Monday. While the bank is currently the subject of multiple U.S. law-enforcement probes for ties to illegal money transactions, this is the first time the bank disclosed that Iranian transactions are under scrutiny and that it could face serious charges.
Investigations. To date, the bank's HSBC USA Inc unit is under investigation by the Justice Department, the Manhattan District Attorney, 2 Treasury department agencies, and the Federal Reserve, looking into "historical transactions involving Iranian parties and other parties subject to" U.S. economic sanctions. Financial institutions doing business in the U.S. are prohibited from aiding Iran, a sanctioned country.
Banks. In recent history, the Manhattan District Attorney and Justice Department have settled with some European banks that operated transfer systems for Iranian clients. Banks helped clients trying to improperly move money by removing, or stripping out, references that could tip off a U.S. bank system to a transaction tied to Iran or another sanctioned state.
HSBC disclosed the new details as part of the bank's 2011 annual results. HSBC USA provides commercial and consumer banking and operates 461 branches. Prior to the filing with the SEC, the bank previously said in securities filings that it was facing inquiries and it had received grand jury subpoenas.
Money-Laundering Inquiry. Last month, HSBC was under investigation by a U.S. Senate panel in a money-laundering inquiry. In January, the bank reinforced its legal defense team by naming former top U.S. Treasury Department official Stuart Levey as its chief legal officer. Before leaving the Treasury Department last year, Mr. Levey specialized in combating terrorism financing.
In the filing on Monday, HSBC also highlighted the seriousness of the U.S. investigations, saying it's likely "there will be some form of formal enforcement action, which may be criminal or civil in nature."
Prosecution. The bank suggested in the SEC filing that the U.S. inquiries could result in a deferred prosecution. That type of agreement with prosecutors requires a bank to acknowledge criminal wrongdoing and leaves the door open for further prosecution if more violations occur.
In the SEC filing, the HSBC unit referred to recent investigations into other financial institutions concluding in settlements, saying, "Some of those settlements involved the filing of criminal charges, in some cases including agreements to defer prosecution of these charges, and the imposition of fines and penalties." He added that fines and penalties paid by other institutions were "significant."
HSBC continues to cooperate fully with all investigations.
For further details, go to [Reuters, 2/28/12].
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