Bank Pays Fine for Failing to Catch Money Laundering

ParkmanLawFirm
January 11, 2013

In December 2012, HSBC Holdings admitted ignoring evidence its clients were engaged in criminal money laundering, and agreed to pay $1.9 billion in settlement to the United States Department of Justice and other United States law enforcement agencies. As a result of this settlement, criminal charges will be avoided. White collar criminal attorneys who specialize in money laundering believe this is the largest settlement of its kind in United States history.

The bank has agreed that it violated the Bank Secrecy Act, a law created to prevent criminal money laundering activity. A settlement was thought to be in the works since HSBC received a warning from the Office of the Comptroller of the Currency in 2010. As a result, the settlement was not completely unexpected by the bank’s shareholders.

It has been reported that Immigration and Customs Enforcement (ICE) Agents first began investigating suspicious cash transactions at HSBC offices in the United States and Mexico. It also came to light in a Federal Criminal drug prosecution in New York that drug traffickers engaged in money laundering activities that could have been stopped or reported by HSBC.

In this case in the Federal Court in Brooklyn, a federal law enforcement task force used wire taps, email searches and other investigative procedures to show how drug traffickers laundered illegal drug proceeds through HSBC’s banks.

Cocaine, Marijuana and Heroin traffickers would sell their drugs in the United States and send the cash proceeds across the border to Mexico. The cash would then be deposited into bank accounts HSBC branches in Mexico. These large cash deposits should have raised suspicion, according to U.S. Department of Justice.

Once these large cash deposits were safely in the HSBC branches in Mexico the drug funds would then be wired to business in the United States where they were used to purchase consumer goods. These goods would then be exported to South America and sold to generate ‘clean’ money.

This money laundering activity led to a U.S. Senate investigation, which determined HSBC essentially turned a blind eye to red flags of money laundering. As a result, HSBC has introduced what they term “know your customer” criteria. These criteria were written to prevent providing banking services for those involved in criminal enterprises.

HSBC and its employees were not charged criminally. Instead the bank agreed to deferred-prosecution that prevents further criminal liability as long as the bank institutes sufficient controls to comply with anti-money laundering laws.