HSBC Holdings plc (NYSE:HBC) (LON:HSBA) could face criminal prosecution and a possible cancellation of its license to conduct business in the United States as settlement on the money laundering charges against it is delayed. A federal judge is considering to rejecting the deal.
Federal Judge, John Gleeson of the Eastern District Court of New York is hesitant to approve the deferred prosecution agreement (DPA) between the Department of Justice (DOJ) and HSBC Holdings plc (NYSE:HBC) (LON:HSBA).
During a hearing in December last year, he requested the legal counsels of the DOJ to provide compelling reasons to him to approve the settlement. Gleeson said, “My suggestion is you present to the court a document that demonstrates why I should accept the agreement,” He noted the criticisms on the settlement. He said, “There’s been some publicized criticisms of this.”
Money Laundering Charges Against HSBC Holdings:
Sen. Chuck Grassley attacked the DOJ decision to settle the money laundering charges against HSBC Holdings plc (NYSE:HBC) (LON:HSBA). According to him, the agency’s action was “inexcusable.”
“What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists. I cannot help but agree with an editorial in the New York Times that the government has bought into the notion that too big to fail is too big to jail,” wrote Senator Grassley in a letter to Attorney General Eric Holder.
In February 15, Gleeson released a court order stating that the “court has not yet approved or disapproved the proposed agreement disposing of the case. The application for approval of the agreement has been taken under advisement.”
Stuart McWilliam, senior lobbyist at Global Witness commented that the DOJ has a clear opportunity to reconsider the penalties imposed against HSBC Holdings plc (NYSE:HBC) (LON:HSBA) for its widespread mistakes on money laundering since the DPA is not yet approved.
HSBC Holdings plc (NYSE:HBC) (LON:HSBA) agreed to pay a penalty of $1.92 billion to settle the criminal charges filed by the DOJ for willfully failing to maintain an effective anti-money laundering program, failing to conduct due diligence on its foreign correspondent affiliates, violating the International Emergency Economic Powers Act (IEEPA), and the Trading with the Enemy Act (TWEA).
The bank accepted its responsibility for its criminal conduct and its employees, waived federal indictment, and agreed to the filing of information. Stuart Gulliver, CEO of HSBC Holdings plc (NYSE:HBC) (LON:HSBA) previously stated, “We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes.”
Court documents revealed that HSBC Bank USA rated Mexico as “standard” risk, the lowest anti-money laundering risk category despite evidences of serious money laundering risks associated with doing business in the country. The bank failed to monitor more than $670 billion in wire transfers and over $9.4 billion in purchase of physical dollars from HSBC Mexico from 2006 to 2010. Its failures allowed Sinaloa Cartel in Mexico and Norte del Valle Cartel in Columbia to launder approximately $881 million proceeds from drug trafficking.