U.S. prosecutors asked a federal judge to sign off on HSBC Holdings Plc (HSBA)’s $1.9 billion settlement of charges it enabled drug cartels to launder millions of dollars in trafficking proceeds.
The Justice Department yesterday filed a brief in federal court in Brooklyn, New York, defending the deal, under which Europe’s largest bank can avoid further prosecution. U.S. District Judge John Gleeson last month told both sides to justify the accord, saying there had been “some publicized criticism” of it.
The agreement is justified because it includes the largest- ever forfeiture in the prosecution of a bank and provides for monitoring to prevent future violations, prosecutors said.
“These strict conditions, and the unprecedented forfeiture and penalties imposed, serve as a significant deterrent against future similar conduct,” the government said.
HSBC was accused of employing lax oversight procedures for transactions in Mexico and other areas considered at risk for money laundering. The London-based bank failed to monitor more than $670 billion in wire transfers and more than $9.4 billion in purchases of U.S. dollars from HSBC Mexico, prosecutors said.
Lack of proper controls allowed the Sinaloa drug cartel in Mexico and the Norte del Valle cartel in Colombia to move more than $881 million through HSBC’s U.S. unit from 2006 to 2010, according to the U.S.
HSBC “ignored the money-laundering risks associated with doing business with certain Mexican customers” in those years, the government said in court papers. Knowing of deficiencies in its anti-money-laundering programs, the bank reduced resources for them “to cut costs and increase profits,” according to the U.S. statement, filed in December.
Under a deferred-prosecution agreement, HSBC won’t contest the statement of facts or 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 International Emergency Economic Powers Act.
The bank will pay a $1.25 billion forfeiture and $665 million in civil penalties, prosecutors announced in December.
The case is U.S. v. HSBC Bank USA NA, 1:12-cr-00763, U.S. District Court, Eastern District of New York (Brooklyn).
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