HSBC could lose deferred prosecution agreement
HSBC, the giant UK bank, is so slow it’s dangerous.
The bank, hammered in 2012 for its lax anti-money-laundering safeguards, is still “under serious money-laundering and sanctions risk” because it hasn’t tightened up parts of its operation, federal prosecutors in Brooklyn said Monday.
Without top-flight safeguards, HSBC could still be inadvertently laundering money, prosecutors claimed in a letter to a judge that was made public on Monday.
Because of that risk, an explosive, 1,000-page report on the bank by a federal monitor detailing HSBC’s malfeasance should be kept under wraps, the Justice Department insisted to the judge in the letter.
Releasing the report could tip off criminals and provide them a blueprint on how to avoid money-laundering safeguards, Justice claims.
In addition, releasing the report could scare away regulators in Malaysia and Hong Kong — who have promised to cooperate but only if the confidential information they supplied remained under seal, the Justice Dept. said.
Prosecutors have been going after HSBC, the largest UK bank by assets, for failing to clean up its act after it admitted to laundering money for Mexican drug lords and terrorists.
The government agreed to a deferred prosecution agreement if a monitor was installed and HSBC corrected its ways.
A summary of the monitor’s report hinted that HSBC was not correcting its ways — setting in motion a tussle over the report.
While the report hasn’t been made public, it’s been responsible for huge changes within the bank. Patrick Nolan, who was head of the HSBC’s global banking and markets and was known for his “combativeness” and creating a “deficient culture,” has been replaced with Thierry Roland.
The Post first reported in April.
The embattled bank is also planning to cut as many as 20,000 jobs, according to a report from Sky News.
The monitor, Michael Cherkasky, told federal prosecutors that regulators in European and Asian countries threatened to pull his access to confidential information — essentially making him unable to do his job — if any of it was shared beyond the DOJ, the Federal Reserve, and the UK Financial Conduct Authority, according to the letter.
“In one European country, [the Monitor and his team] were told that if review of confidential materials were not restricted to the FCA, DOJ and [Federal Reserve], that country’s regulator would limit our access to those materials,” he told federal prosecutors in the report.
Malaysian authorities also threatened Cherkasky with a “lack of access to key information,” and the Hong Kong Monetary Authority said that increased accountability may make employees less likely to come forward.
“Releasing this report publicly would have a chilling effect on [HSBC] employees, and the level of cooperation and candor I receive could decrease substantially,” Cherkasky said in the report.
Kelly Currie, the acting US Attorney in Brooklyn, also argued that the bank’s operations are so riddled with compliance holes that, if the report was made public, criminals could exploit HSBC and launder more money.
“The Monitor also identifies areas where new compliance policies have not yet been implemented, including areas where the lack of due diligence currently exposes HSBC to serious money-laundering and sanctions risk,” she said.
It is not clear when Judge Gleeson will rule on whether or not to make the report public.
