A Collaboration with the University of Pittsburgh

UK bank to pay record $1.9 billion to settle US money laundering case

The US Department of Justice (DOJ) [official website] announced [press release] Tuesday that HSBC Holdings [corporate website], one of the world's largest banking institutions based in the UK, and HSBC Bank USA [corporate websites], a federally chartered banking corporation based in Virginia, have agreed to forfeit $1.256 billion to settle a multi-year probe related to the group's failure to enforce rules to prevent money laundering. As part of the DOJ's deal, HSBC has agreed to enter into a deferred prosecution agreement [AP report] for its violation of various federal laws. In particular, HSBC Bank USA violated the Bank Secrecy Act [materials] when it failed to maintain "an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders." Additionally, according to the DOJ, HSBC also violated the International Emergency Economic Powers Act and the Trading with the Enemy Act [texts, PDFs] by "illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan, and Burma, all countries that were subject to sanctions by the Office of Foreign Assets Control [official website] at the time of the transactions." Aside from criminal penalties, HSBC has also agreed to pay $500 million to the Office of the Comptroller of Currency and $165 million to the Federal Reserve [official websites] for a total of about $1.92 billion, which is the largest fine ever imposed on a bank [Reuters report]. Although the agreement settles HSBC's case in the US, which was filed in the US District Court for the Eastern District of New York, the UK's Financial Services Authority [official websites] has chosen to pursue a separate legal action.

Tuesday's announcement was the latest development in the DOJ's recent string of fraudulent practice prosecutions. Last month the DOJ announced [JURIST report] that MoneyGram International, Inc. [corporate website] entered into a similar deferred prosecution agreement for criminally aiding and abetting wire fraud and failing to maintain an effective anti-money laundering program. A week prior, Wells Fargo [corporate website] claimed [JURIST report] that a lawsuit filed by the US government to recover money from defective mortgages was barred by a previous settlement. In September, a federal judge approved [JURIST report] a settlement agreement between the DOJ and certain e-book publishers in a price-fixing suit. In July, a federal court granted [JURIST report] an emergency order freezing the assets of foreign brokers accused of insider trading. Also in July, the DOJ and pharmaceutical giant GlaxoSmithKline [corporate website] announced [JURIST report] a $3 billion settlement in a series of criminal and civil healthcare fraud cases against the drug company.

About Paper Chase

Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

© Copyright JURIST Legal News and Research Services, Inc., 2013.