Brooklyn, NY–(ENEWSPF)–December 11, 2012.
Thank you, U.S. Attorney Lynch. Today, we are here to announce a historic criminal resolution involving one of the world’s largest banks.
HSBC is being held accountable for stunning failures of oversight – and worse – that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries.
From 2006 to 2010, the Sinaloa Cartel in Mexico, the Norte del Valle Cartel in Colombia, and other drug traffickers laundered at least $881 million in illegal narcotics trafficking proceeds through HSBC Bank USA. These traffickers didn’t have to try very hard. They would sometimes deposit hundreds of thousands of dollars in cash, in a single day, into a single account, using boxes designed to fit the precise dimensions of the teller windows in HSBC Mexico’s branches.
In total, HSBC Bank USA failed to monitor over $670 billion in wire transfers from HSBC Mexico between 2006 and 2009, and failed to monitor over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico over that same period.
In addition to this egregious lack of oversight, from the mid-1990s through at least September 2006, HSBC knowingly allowed hundreds of millions of dollars to move through the U.S. financial system on behalf of banks located in countries subject to U.S. sanctions, including Cuba, Iran and Sudan. On at least one occasion, HSBC instructed a bank in Iran on how to format payment messages so that the transactions would not be blocked or rejected by the United States.
As part of today’s resolution, HSBC has admitted that it violated the Bank Secrecy Act, the International Emergency Economic Powers Act and the Trading With the Enemy Act, and it has agreed to forfeit over $1.25 billion – by far the largest forfeiture ever in a case involving a bank. HSBC has also agreed to pay $665 million in civil penalties, bringing the total cost of this resolution to the bank to nearly $2 billion. HSBC will also be subject to strict oversight by a corporate monitor for the next five years – the duration of the deferred prosecution agreement – and it must further enhance its compliance structure.
As a result of the government’s investigation, HSBC has replaced virtually all of its senior management, “clawed back” deferred compensation bonuses given to some of its most senior U.S. anti-money laundering and compliance officers, and agreed to partially defer bonus compensation for its most senior officials during the five-year period of the deferred prosecution agreement.
The record of dysfunction that prevailed at HSBC for many years was astonishing. Today, HSBC is paying a heavy price for its conduct, and, under the terms of today’s agreement, if the bank fails to comply with the agreement in any way, we reserve the right to fully prosecute it.
Over two years ago, I announced the creation of the Money Laundering and Bank Integrity Unit, within the Criminal Division’s Asset Forfeiture and Money Laundering Section, to focus on exactly the type of enforcement actions represented by this resolution with HSBC. Today represents the unit’s largest case to date, and together with U.S. Attorneys’ offices around the country, we intend to continue ensuring that financial institutions do their part to protect the U.S. financial system against the threat of money laundering – and to continue holding them accountable when they don’t.
I would like to personally thank the many fine prosecutors in the Asset Forfeiture and Money Laundering Section and the U.S. Attorney’s Office for the Eastern District of New York, and the many talented law enforcement agents, who worked such long hours to develop this case. I would also like to thank our colleagues at the New York County District Attorney’s Office for their important parallel investigation.