U.S. sides with HSBC to block release of money laundering report

EghtesadOnline: The U.S. government asked a federal appeals court on Thursday to block the release of a report detailing how HSBC Holdings Plc is working to improve its money laundering controls after the British bank was fined $1.92 billion.

News ID: ۷۶۸۵۵۳

25 July 2016

In a brief filed with the 2nd U.S. Circuit Court of Appeals, the U.S. Department of Justice sought to overturn an order issued earlier this year by U.S. District Judge John Gleeson to make public a report by the bank's outside monitor.

"Public disclosure of the monitor's report, even in redacted form, would hinder the monitor's ability to supervise HSBC," the government's court filing said, adding that bank employees would be less likely to cooperate with the monitor if they knew their interactions could be released.

According to Reuters, HSBC concurred with the court's finding. "HSBC also argues that the Monitor's report should remain confidential, as have the Monitor, the UK Financial Conduct Authority, the US Federal Reserve and other HSBC regulators," HSBC said in a statement. "The effectiveness of the monitorship is dependent on confidentiality."

A spokesman for the Justice Department declined to comment.

The filing comes a week after U.S. congressional investigators criticized senior officials at the Department of Justice for overruling internal recommendations to criminally prosecute HSBC for money-laundering violations.

Instead, the government in 2012 fined HSBC and entered into a five-year deferred prosecution agreement that stipulated all charges would be dropped if the bank agreed to install an independent monitor to help improve compliance.

In the 2012 settlement, HSBC admitted to violating U.S. sanctions laws and failing to stop Mexican and Colombian cartels from laundering hundreds of millions of dollars in drug proceeds through the bank.

HSBC agreed to monitoring by former New York prosecutor Michael Cherkasky, now the executive chairman of the compliance company Exiger. One of the bank's mortgage customers filed a motion to unseal Cherkasky's report to find out whether the bank continued to engage in what the customer claimed were unsafe business practices.

The Justice Department in its brief frequently cited a 2016 decision by a U.S. appeals court to uphold a deferred prosecution agreement with Fokker Services, a Dutch company accused of illegally shipping aircraft parts to Iran and other countries. The appeals court ruled that a Washington-based District Court judge lacked the authority to reject an agreement reached by U.S. prosecutors and the company.

In an earlier court filing, the government said that while HSBC has made significant progress since the agreement, it is still not doing enough to thwart money laundering.

The case is U.S. v. HSBC Bank USA NA et al, 2nd U.S. Circuit Court of Appeals, No. 16-308.