HSBC Pays Record $1.9 Billion in Settlement Following AML Investigation (Dec. 11, 2012)
Dec. 11, 2012
HSBC’s record $1.9 billion payout to settle allegations that it violated U.S. anti-money laundering (AML) rules suggests that the government is getting better at spotting and punishing organizations that try to skirt regulations, legal experts say. U.K.-based HSBC Holdings plc today said it reached a deferred-prosecution agreement with the U.S. government following an investigation that it violated AML and sanction laws. The investigation, begun in 2009, resulted in the U.S. accusing HSBC of improperly routing drug cartel money through the U.S. from Mexico and improperly moving money through the U.S. from Iran and Syria. To avoid prosecution, HSBC agreed to what is said to be the highest-ever fine paid by a bank and also took various actions to strengthen its compliance policies and procedures. “The HSBC of today is a fundamentally different organization from the one that made those mistakes,” Stuart Gulliver, HSBC’s group chief executive said, noting since last year the bank has implemented “the highest standards” for compliance with U.S. laws, including increasing its spending on AML nine-fold, revamping its Know Your Customer program and spending more than $290 million on internal remedial measures.
Separately, Standard Chartered PLC, with operations in the U.S., London and Dubai, this week agreed to pay $327 million in penalties for allegedly violating sanctions against Iran and Libya. Together with penalties assessed recently against First Bank of Delaware by FinCEN and the FDIC, which resulted in concurrent $15 million civil money penalties for alleged violations of AML and the Bank Secrecy Act, the incidents underscore the government’s new aggressiveness in enforcing AML, Beth Moskow-Schnoll, a partner with Ballard Spahr LLP, tells Paybefore. “I think we’ll see more of these, because when the government is successful, they tend to follow up on other violators,” Moskow-Schnoll says.
While no specific violations involving prepaid cards are part of the latest round of fines and settlements, “this will certainly continue the trend of both banks and regulators imposing higher scrutiny and stricter limits on prepaid products in general,” Judith Rinearson, a partner with Bryan Cave LLP, says. An important lesson for the prepaid industry is “not to skimp on AML resources,” she says, and to take note of moving funds across borders, particularly to and from high-risk locations. “Prepaid card issuers and program managers need to exercise significant caution when dealing with international prepaid card programs,” she warns.
