New York (Hedgeco.Net) – The U.S. Department of the Treasury announced settlements amounting to $875 million, the largest collective settlement in the department’s history, with HSBC. In total, more than $1.9 billion were assessed in penalties for HSBC’s conduct in violation of the Bank Secrecy Act (BSA) and U.S. sanctions.
“These settlements implicate willful and dangerous practices by one of the world’s biggest banks,” said Under Secretary for Terrorism and Financial Intelligence David S. Cohen. “HSBC absolutely knew the risks of the business it pursued, yet it ignored specific, obvious warnings. Its failures allowed hundreds of millions of dollars in drug money to pass through its unattended gates.”
The bank allowed hundreds of millions of dollars from Mexican drug trafficking organizations to flow through accounts in the United States.
From 2002 until 2009, despite obvious information to the contrary, the bank rated Mexico as having “standard” money laundering risk, the lowest of the bank’s four possible country risk ratings. Additionally, from 2006 through 2009, the bank did not monitor bulk cash transactions conducted with its Mexican and other foreign affiliates and took delivery of more than $15 billion in cash.
Similarly, the bank maintained correspondent accounts for affiliates around the world and did not collect or maintain any customer due diligence information regarding these relationships. As a consequence, many foreign financial institutions and their customers effectively gained unmonitored access to the U.S. financial system without safeguards against illicit financial activity.
These compliance failures meant that the bank did not and could not reliably detect and report suspicious activity and therefore deprived law enforcement and regulators of critical information used to combat money laundering, terrorist finance, transnational organized crime, and other domestic and global financial threats.
The settlement resolves an investigation into HSBC’s apparent violations of the Iranian Transactions Regulations (ITR), 31 C.F.R. part 560; the Burmese Sanctions Regulations (BSR), 31 C.F.R. part 537; the Sudanese Sanctions Regulations (SSR), 31 C.F.R. part 538; the Cuban Assets Control Regulations (CACR), 31 C.F.R. part 515; and the Libyan Sanctions Regulations (LSR), 31 C.F.R. part 550 (which were in effect until 2004).
Payments totaling approximately $430 million were routed through U.S. banks for or on behalf of sanctioned parties in apparent violation of U.S. sanctions.
HSBC says it has terminated the conduct leading to the settlement. Under the settlement agreement, HSBC is required to put in place and maintain policies and procedures to minimize the risk of the recurrence of such conduct in the future.
Editing by Alex Akesson
Editor for HedgeCo.net
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