U.S. says HSBC must do more to improve compliance

Wed Apr 1, 2015 5:49pm EDT
 
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By Jonathan Stempel and Karen Freifeld

NEW YORK (Reuters) - HSBC Holdings Plc is making progress toward cleaning up its operations, after reaching a $1.92 billion settlement of charges related to money laundering, but has not done enough, the U.S. Department of Justice said on Wednesday.

The government made its criticisms after reviewing findings of an independent monitor, Michael Cherkasky, who was appointed in connection with HSBC's so-called deferred prosecution agreement with U.S. authorities.

That accord let HSBC avoid criminal charges for having, as federal prosecutors put it, devolved into a "preferred financial institution" for money launderers and Mexican and Colombian drug cartels, and handled transactions for customers in Burma, Cuba, Iran, Libya and Sudan, which were all subject to U.S. sanctions.

According to a letter from U.S. Attorney Loretta Lynch in Brooklyn, New York, the government agreed with Cherkasky that HSBC has acted in "good faith" and "made material progress toward meeting the most stringent compliance standards imposed to date upon a global financial institution."

But Lynch, who is President Barack Obama's nominee to become U.S. Attorney General, also said Cherkasky had found progress in some areas "too slow," especially in improving HSBC's corporate culture and compliance technology.

Lynch pointed to instances where senior bankers interfered with compliance reviews, reflecting a "combativeness" and "basic lack of cooperativeness," while compliance technology systems suffered from "fragmentation and a lack of connectivity."

Stuart Levey, HSBC's chief legal officer, in a statement said the British bank is continuing to meet all its obligations under the deferred prosecution agreement, and that its leaders "are making steady progress toward that objective and appreciate the monitor's ongoing work."

Cherkasky is a former Manhattan prosecutor who has led several companies, and chaired the New York State Commission on Public Integrity.   Continued...

 
People are seen inside a HSBC Swiss branch of the bank in Geneva February 18, 2015. REUTERS/Pierre Albouy