Troubled banking giant HSBC continues to face questions about its ability to block transactions that facilitate law breaking.
The challenges faced by the bank were highlighted in a report by the Guardian based on comments allegedly made in the last three months by HSBC’s global head of sanctions, Lee Hale, who reportedly conceded that further regulatory breaches were likely.
The Guardian said it had heard audio of a confidential meeting Hale had with independent lawyers monitoring HSBC as part of a 2012 deal with the U.S. Department of Justice, which allowed the bank to pay a $1.9 billion fine and submit to monitoring in exchange for deferred prosecution for the actions of its Mexican branch in laundering millions of dollars in drug cartel money.
According to the Guardian, HSBC said in a statement that it did not recognize the comments in the recording and also said the comments had been taken out of context.
Though Hale said the bank had made progress in updating compliance procedures and strengthening report and financial controls, according to the Guardian he also said that “given the size and scale of HSBC,” in his view, “it is a cast-iron certain[ty] this will happen, at some point in the future we’re going to have some big breach, some regulatory breach.” He added, “I hope it doesn’t happen, but it is likely.”
The Guardian story appeared just a day after the Justice Department filed its summary of findings by Michael Cherkasky, the independent monitor appointed to keep an eye on HSBC’s operations after the 2012 plea deal. The letter filed in federal court in Brooklyn was signed by U.S. Attorney Loretta E. Lynch, who is awaiting confirmation as President Barack Obama’s choice to be U.S. Attorney General. The letter noted improvements at the bank. But the letter also said, “in certain instances, the Monitor believes that HSBC Group’s progress has been too slow.”
The letter noted that Cherkasky identified two of the biggest barriers to change as “its corporate culture and its compliance technology.”
The court’s oversight of HSBC through an independent monitor predated a more recent expose of the bank’s issues by the International Consortium of Investigative Journalists and its partners worldwide. Stories by ICIJ, Le Monde, the Guardian and others described how HSBC’s private bank in Switzerland routinely facilitated transactions by violators of international sanctions, arms traffickers, tax evaders and other wrongdoers.
In the wake of those disclosures, the bank is under intense scrutiny. In France, prosecutors have recommended that it face criminal charges. And in the United Kingdom a former cabinet official, the head of the BBC Trust and a former high-ranking tax official have been grilled about their employment by the bank.
Dave Hartnett, former head of tax for HM Revenue & Customs told a hearing of the UK Parliament’s Public Accounts Committee in late March, that he took a job at HSBC in 2012 after leaving his public post to join an effort to make the bank secure after the problems it faced in Mexico and after the UK and other countries received information from French authorities about bank customers who had evaded taxes.
During his time at the bank only three of those cases were submitted for prosecution, of which only one resulted in a conviction. Hartnett said he was not involved in the cases which were handled by HMRC’s enforcement team, but said he was surprised there weren't more prosecutions based on the HSBC data.
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