US Justice Department official Lanny Breuer explains the
HSBC sanctions. REUTERS/Joshua Lott
HSBC Holdings has agreed to pay a record $US1.92 billion
in fines to US authorities for allowing itself to be used to
launder a river of drug money flowing out of Mexico and other
Mexico's Sinaloa cartel and Colombia's Norte del Valle cartel
between them laundered $US881 million through HSBC and a
Mexican unit, the US Justice Department said.
In a deferred prosecution agreement with the Justice
Department, the bank acknowledged it failed to maintain an
effective programme against money laundering and failed to
conduct basic due diligence on some of its account holders.
Under the agreement, which was reported by Reuters last week,
the bank agreed to take steps to fix the problems, forfeit
$US1.256 billion, and retain a compliance monitor. The bank
also agreed to pay $US665 million in civil penalties to
regulators including to the Office of the Comptroller of the
Currency, the Federal Reserve, and the Treasury Department.
"We accept responsibility for our past mistakes. We have said
we are profoundly sorry for them, and we do so again. The
HSBC of today is a fundamentally different organization from
the one that made those mistakes," HSBC Chief Executive
Stuart Gulliver said.
HSBC's money-laundering lapses in Mexico and elsewhere were
cited in an extensive Senate report earlier this year, but
the documents filed in court provided new details.
Despite the known risks of doing business in Mexico, the bank
put the country in its lowest risk category, which excluded
$US670 billion in transactions from the monitoring systems,
according to the documents.
Bank officials repeatedly ignored internal warnings that
HSBC's monitoring systems were inadequate, the Justice
Department said. In 2008, for example, the CEO of HSBC Mexico
was told that Mexican law enforcement had a recording of a
Mexican drug lord saying that HSBC Mexico was the place to
Mexican traffickers used boxes specifically designed to the
dimensions of an HSBC Mexico teller's window to deposit cash
on a daily basis.
The agreement also described a vastly understaffed compliance
department. At times, only one to four employees were
responsible for reviewing alerts identifying suspicious wire
transactions. When HSBC processed bulk cash, a business it
calls Banknotes, only one or two compliance officials oversaw
transactions for 500 to 600 customers, the Justice Department
Compliance was "woefully inadequate," Loretta Lynch, the US
Attorney in Brooklyn, said at a press conference.