HSBC Judge Approves $1.9B Drug-Money Laundering Accord
By Christie Smythe - Jul 3, 2013 12:00 AM ET
HSBC Holdings Plc (HSBA)’s $1.9 billion agreement with the U.S. to resolve charges it enabled Latin American drug cartels to launder billions of dollars was approved by a federal judge.
U.S. District Judge John Gleeson in Brooklyn, New York, signed off July 1 on a deferred-prosecution agreement, a critical component of the London-based bank’s settlement. The order was filed more than six months after the government announced reaching an accord with the bank.
Both sides argued Gleeson didn’t have the power to approve or reject the terms they came to, the judge said in his order.
“A pending criminal case is not window dressing” Gleeson wrote. “Nor is the court, to borrow a famous phrase, a potted plant. By placing a criminal matter on the docket of a federal court, the parties have subjected their DPA to the legitimate exercise of the court’s authority.”
HSBC was accused of failing to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. currency from HSBC Mexico, allowing for money laundering, prosecutors said. In December, Gleeson told prosecutors there had been “publicized criticism” of the agreement, which lets the bank and management avoid further criminal proceedings. He said he’d weigh whether to approve it.
Gleeson said he will continue supervising implementation of the deal, under which the bank agreed not to contest criminal charges of failing to maintain an effective anti-money-laundering program, failing to conduct due diligence, and violating the Trading With the Enemy Act and the International Emergency Economic Powers Act.
The bank, Europe’s largest, agreed to pay a $1.25 billion forfeiture and $665 million in civil penalties, prosecutors announced in December.
Lack of proper controls allowed the Sinaloa drug cartel in Mexico and the Norte del Valle cartel inColombia to move more than $881 million through HSBC’s U.S. unit from 2006 to 2010, the government alleged in the case. The bank also cut resources for its anti-money-laundering programs to “cut costs and increase profits,” the government said in court filings.
The case is U.S. v. HSBC Bank USA NA, 12-cr-00763, U.S. District Court, Eastern District of New York (Brooklyn).
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