Tillipman and Block: Have $4.8 billion in penalties deterred HSBC?
Wednesday, February 7, 2018 at 8:08AM
Jessica Tillipman and Samantha Block in Belgium, HSBC, money laundering

According to Good Jobs First’s “Violation Tracker," since 2000, HSBC has accrued $4.8 billion in penalties in 23 criminal and civil enforcement actions.

This figure does not include violations committed by the company’s subsidiaries.

HSBC’s top offenses include banking violations, anti-money-laundering deficiencies, fraud, toxic security abuses, and mortgage abuses.

While this total accounts for violations that occurred over nearly two decades, HSBC’s chronic recidivism appears to have gained momentum in recent years.

In 2012, the DOJ accused HSBC of assisting organizations linked to Al Qaeda and Hezbollah by moving money and implementing inadequate safeguards to protect against money laundering, resulting in at least $881 million of drug trafficking proceeds entering the U.S. economy.

The DOJ was not alone in its investigation of HSBC’s internal controls; the Federal Reserve, the Office of the Comptroller of the Currency, the Manhattan district attorney, the Office of Foreign Assets Control, and the Senate Permanente Subcommittee on Investigations also conducted investigations into HSBC’s policies.

The DOJ reached a settlement with HSBC and explained that criminal charges were not pursued because “HSBC would almost certainly have lost its banking license in the U.S., the future of the institution would have been under threat and the entire banking system would have been destabilized."

Soon thereafter, in 2013, HSBC agreed to a new $249 million settlement with the Federal Reserve and the Office of the Comptroller of the Currency for alleged foreclosure abuses, including charging excessive fees and using improper documents. Months later, HSBC settled additional criminal charges in the United States by entering a $1.92 billion settlement for money laundering.

Here are other HSBC charges that have settled in recent years:

HSBC has not only repeatedly reached settlements that involved alleged violations of U.S. law, but those of other countries as well. In 2015, HSBC avoided criminal charges by agreeing to pay a $43 million settlement for allowing money laundering to take place in its Swiss subsidiary.

HSBC also faced criminal charges in Belgium for its subsidiary’s actions. These actions included allegedly facilitating tax fraud and money laundering. In 2016, the Belgium government confirmed that it would be recovering $600 million from its “black money” probe into 829 of HSBC’s accounts.

In 2017, HSBC again found itself in the middle of a money laundering scandal. A member of parliament, Lord Peter Hain, urged the UK House of Lords to investigate HSBC’s transactions out of South Africa. Hain, who grew up in South Africa, accused the British bank of ignoring transactions that had been internally flagged as suspicious. 

State governments have also joined in the investigations of HSBC. In 2016, California joined the DOJ, Housing & Urban Development (HUD), and 48 other states in a $470 million settlement with HSBC, ending charges that the bank participated in faulty mortgage origination and servicing practices.

Although settlement agreements have their benefits, one need only look at the many HSBC settlements to ask whether the fundamental underpinnings of the criminal justice system, such as deterrence, punishment, and rehabilitation, have been met by the continued use of settlement agreements with recidivists.

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Jessica Tillipman is a Senior Editor of the FCPA Blog and Assistant Dean at The George Washington University Law School. You can follow her on Twitter at @jtillipman.

Samantha Block is a 3L at The George Washington University Law School.

Article originally appeared on The FCPA Blog (http://www.fcpablog.com/).
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