Banking giant fined $1.9B for prohibited transactions
by Larry Neumeister and Christina Rexrode
Associated Press Writers
December 12, 2012 12:00 AM | 547 views | 1 1 comments | 3 3 recommendations | email to a friend | print
Lanny Breuer, right, Assistant Attorney General of the Justice Department's Criminal Division, addresses a news conference in Brooklyn, N.Y. on Tuesday. British bank HSBC has agreed to pay $1.9 billion to settle a New York based-probe in connection with the laundering of money from narcotics traffickers in Mexico, U.S. authorities announced Tuesday.<br>The Associated Press
Lanny Breuer, right, Assistant Attorney General of the Justice Department's Criminal Division, addresses a news conference in Brooklyn, N.Y. on Tuesday. British bank HSBC has agreed to pay $1.9 billion to settle a New York based-probe in connection with the laundering of money from narcotics traffickers in Mexico, U.S. authorities announced Tuesday.
The Associated Press
slideshow
NEW YORK — American authorities on Tuesday cited “astonishing” dysfunction at the British bank HSBC and said that it had helped Mexican drug traffickers, Iran, Libya and others under U.S. suspicion or sanction to move money around the world.

HSBC agreed to pay $1.9 billion, the largest penalty ever imposed on a bank.

The U.S. stopped short of charging executives, citing the bank’s immediate, full cooperation and the damage that an assault on the company might cause on economies and people, including thousands who would lose jobs if the bank collapsed.

Outside experts said it was evidence that a doctrine of “too big to fail,” or at least “too big to prosecute,” was alive and well four years after the financial crisis.

The settlement avoided a legal battle that could have further savaged the bank’s reputation and undermined confidence in the banking system. HSBC does business in almost 80 countries, so many that it calls itself “the world’s local bank.”

Lanny A. Breuer, assistant attorney general of the Justice Department’s criminal division, cited a “stunning, stunning failure” by the bank to monitor itself. He said that it enabled countries subject to U.S. sanction — Cuba, Iran, Libya, Myanmar and Sudan — to move about $660 million in prohibited transactions through U.S. financial institutions, including HSBC, from the mid-1990s through September 2006.

Officials noted that HSBC officers in the United States had warned counterparts at the parent company that efforts to hide where financial transactions originated would expose the bank to sanctions, but the protests were ignored.

HSBC even instructed an Iranian bank in one instance how to format messages so that its financial transactions would not be blocked, Breuer said at a news conference announcing the settlement.

“The record of dysfunction that prevailed at HSBC for many years is simply astonishing,” Breuer said.

For the government not to go a step further and prosecute was “beyond obscene,” said Bill Black, a former U.S. regulator for the Office of Thrift Supervision who now teaches at the University of Missouri-Kansas City.

“Regulators are telling us, ‘Yes, they’re felons, they’re massive felons, they did it for years, they lied to us, and they made a lot of money ... and they got caught red-handed and they’re gonna walk.”‘

Black disputed the government’s concern that indicting HSBC could take down the financial system.

“That’s the logic that we get stability by leaving felons in charge of our largest banks,” he said. “This is insane.”
Comments
(1)
Comments-icon Post a Comment
shelby2007
|
December 27, 2012
Far too often our government teaches the world that it's okay to be corrupt, and there are no consequences. How bad do you really think the fine hurts the bank? It slaps the stock holders in the face.
*We welcome your comments on the stories and issues of the day and seek to provide a forum for the community to voice opinions. All comments are subject to moderator approval before being made visible on the website but are not edited. The use of profanity, obscene and vulgar language, hate speech, and racial slurs is strictly prohibited. Advertisements, promotions, spam, and links to outside websites will also be rejected. Please read our terms of service for full guides