Remember when HSBC got caught laundering billions for Mexican narco-terror cartels? Remember how they offered to pay five weeks' profits in fines and to defer their executive bonuses to escape criminal charges?
The crime-fighting legal eagles at the Department of Justice approved the settlement last week. Remember, though, if you are suspected of laundering money or selling drugs, the DoJ will take your house away and put you in jail for the rest of your life. Nice to be "too big to jail." Still, deferring multimillion-dollar bonuses has gotta hurt, huh?
HSBC's struggles with its correspondent banking controls have been a long-standing issue for the bank. A 2010 OCC order flagged the issue as the bank's primary anti-money laundering problem and said HSBC had failed to properly police some high-risk cash transactions of its affiliates.
HSBC operates hundreds of affiliates around the world and its US arm acts as the gateway into the U.S. financial system for this network by processing US dollar-denominated payments.
A US Senate report released in mid-2012 said HSBC failed to assess the money laundering risks associated with affiliates before opening correspondent accounts for them.
The interaction between HSBC's US arm and HSBC affiliates around the world continues to be a concern for the OCC, the sources said. In response, the bank has begun advising units that those that fail to implement full anti-money laundering regimes could have their correspondent accounts closed, one of the sources said.
HSBC is paying $2 billion, or 5 weeks' worth of its profit, to avoid criminal charges in drug cartel laundering case [Brett Wolf and Aruna Viswanatha/Thomson Reuters]