Treasury department confirms historic money-laundering settlement

February 09, 2013 (Press-News.org) On December 11, 2012, the U.S. Department of Treasury announced the largest bank settlement in U.S. history, totaling $875 million. The target of the lawsuit was HSBC, one of the largest banks in the world.

HSBC was charged with violating money-laundering regulations that are part of the Bank Secrecy Act. According to the U.S. government, HSBC allowed hundreds of millions of dollars from Mexican drug trafficking organizations to pass through its banks.

HSBC failed to put in place an anti-money laundering program that rated countries' risk for money laundering. For example, instead of rating Mexico as at an above normal risk for laundered funds, HSBC categorized the country's risk as "standard." As a result, the bank did not closely monitor the flow of cash from Mexico and other countries at an increased risk for laundered funds.

Failure to notify law enforcement of suspicious transactions

Because HSBC failed to flag suspicious transactions, law enforcement agencies lacked crucial information for tracking the illicit funds that were passing in and out of the U.S. through HSBC and its global affiliates. In addition, HSBC and its foreign affiliates handled transactions involving countries and individuals subject to U.S. sanctions which the bank should not have authorized. Consequently, HSBC violated sanctions policies on Iran, Sudan, Cuba and Libya.

Terms of the settlement agreement

As part of the settlement agreement, the Office of Foreign Assets Control, or OFAC, required HSBC to implement appropriate risk-management procedures to ensure that it does not continue to violate any international sanctions or anti-money laundering laws. In addition, HSBC will have to provide OFAC with copies of its financial records for review.

Deferred prosecution agreement

The agreement also includes a deferred prosecution agreement between HSBC and the Manhattan District Attorney's office and the Department of Justice. Some conditions of the agreement include a $1.2 billion forfeit and $700 million in fines. An independent auditor will monitor HSBC's progress. If HSBC complies with all of the terms of the agreement and does not engage in any criminal activity for the next five years, the DA's office and the U.S. government will decline to prosecute.

The deferred prosecution agreement should minimize the impact on consumers. Whereas a guilty plea to the charges could have resulted in the partial or complete closure of HSBC operations in the United States, if HSBC complies with the agreement, it will not face any criminal charges and will continue to operate uninterrupted. If you or someone you know has concerns about the impact the settlement will have on you as a consumer, contact an attorney who specializes in tax law to assist you.

Article provided by Tax Law Office of David W. Klasing
Visit us at www.klasing-associates.com