HSBC escaped US money-laundering charges after UK intervention

HSBC Canary Wharf

The US government decided not to pursue criminal charges against HSBC for allowing terrorists and drug dealers to launder millions of dollars after George Osborne and the UK banking regulator intervened to warn that prosecuting Britain’s biggest bank could lead to a “global financial disaster”.

On Monday, a congressional report published letters and emails from Osborne and Financial Services Authority (FSA) officials to their US counterparts warning that launching criminal action against HSBC in 2012 could have sparked a “financial calamity”.

The House financial services committee report said the UK interventions “played a significant role in ultimately persuading the DoJ [Department of Justice] not to prosecute HSBC”. Instead of pursuing a prosecution, the bank agreed to pay a record $1.92bn (£1.4bn) fine.

The report revealed that Osborne wrote to Ben Bernanke, who was then the Federal Reserve chairman, and Timothy Geithner, the then treasury secretary, to warn that prosecuting a “systemically important financial institution” like HSBC “could lead to [financial] contagion” and pose “very serious implications for financial and economic stability, particularly in Europe and Asia”.

The report said the FSA was “problematic”, “weighed in very strongly” and caused a “firestorm”, which led the then attorney general, Eric Holder, to overrule the advice of his own prosecutors and not pursue criminal action.

“FSA has been on the phone for the criminal discussions,” officials wrote in emails released in the House report. “That’s what has caused the latest firestorm. The contents of that discussion are included in the Chancellor’s letter.”

If HSBC had been found guilty of the potential charges, the US government would have been required to review and possibly revoke its charter to do business in the US. The FSA repeatedly warned that even the threat of possible charter withdrawal could have caused a fresh global financial crisis.

The House report said Holder “misled” Congress about the justice department’s reasoning for declining to prosecute. It said the department had enough evidence to pursue criminal charges against HSBC and pointed out that the bank had already admitted to the US government that it broke money laundering rules.

The report said: “Rather than lacking adequate evidence to prove HSBC’s criminal conduct, internal treasury documents show that DoJ leadership declined to pursue [its legal team’s] recommendation to prosecute HSBC because senior DoJ leaders were concerned that prosecuting the bank ‘could result in a global financial disaster’– as the FSA repeatedly warned.”

The 2012 settlement detailed how Mexico’s Sinaloa drug cartel and Colombia’s Norte del Valle cartel laundered $881m through HSBC and a Mexican unit. In some cases, Mexican branches had widened tellers’ windows to allow big boxes of cash to be pushed across the counters.

HSBC also violated US sanctions by working with customers in Iran, Libya, Sudan, Burma and Cuba.

HSBC, the justice department and the US treasury declined to comment on the report.

Powered by Guardian.co.ukThis article was written by Rupert Neate in New York, for The Guardian on Monday 11th July 2016 20.36 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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