Breaking views: HSBC’s money laundering DPA expires – experts give their analysis
11 Dec 2017

HSBC appears to have closed a dark chapter in its history, saying on Monday that its deferred prosecution agreement (DPA) with the United States has expired.

The bank also said it lived up to all its expectations.

The DPA with the US Department of Justice (DoJ) was reached after HSBC admitted to poor compliance controls regarding money laundering of millions for Mexican drug cartels. The bank also landed in trouble for allegedly handling transactions for some sanctioned jurisdictions.

In 2012, HSBC apologised and paid authorities a record $1.9 billion fine as part of the DPA. An independent compliance monitor to assess progress was also appointed.

On Monday it said it was “pleased” that the DoJ had recognised its progress in strengthening its anti-money laundering (AML) and sanctions compliance capabilities.

It added that it is working to ensure that the reforms are sustainable over the long-term and that they will improve over time, given the increasing sophistication of criminal networks that seek to circumvent banks’ controls.

The appointed monitor, who had also been serving since July 2013 as HSBC’s skilled person under a 2012 Direction issued by the UK Financial Conduct Authority, will continue in that capacity for a period of time at the FCA’s discretion, HSBC said.

HSBC believes the DPA has had a positive impact on its operations.

Its Chief Executive Stuart Gulliver said: “HSBC is able to combat financial crime much more effectively today as the result of the significant reforms we have implemented over the last five years.”

But what do the experts say?

Andrew Haynes, financial crime commentator and Professor of Law, University of Wolverhampton
I think HSBC and other banks did change their behaviour as a result of this DPA and other fines at the time.

It was more the size of the fines and the US authorities that put the banks into line. Yes, I think the DPA made a difference in terms of going forward too – we are unlikely to see such misconduct repeated again. If there is misconduct, it will likely be from lower down the line at the bank – and even that won’t be simple, given the tough compliance environment banks operate under nowadays.

The enormity of the fines has pushed the banks (not just HSBC) into a much more careful mode in issues such as laundering. DPAs like any deferred penalty [do] have an effect in terms of a ‘sword of Damocles’ approach but there are different schools of thought on how much deferred prosecution agreements as such make in themselves.

HSBC are not going to go off the rails tomorrow morning now that they have been released.

Nicholas Ryder, anti-money laundering author and Professor in Financial Crime, University of the West of England
The one thing about DPAs, and in particular the one with HSBC, is that these are deals with serial repeat offenders. Look at the crimes HSBC has committed in the last fifteen years and the fines it had to pay.

Did it learn anything from it all? I doubt very much.

What about prosecutions? There is still very little of that – if any at all. Whether it is the MLROs or senior managers, there are no prosecutions to the best of my knowledge. This issue remains unchanged in the banking sector.

It’s also important to note the political interference behind this DPA, the UK speaking to the US government, taking the side of HSBC. So bank are not just’ too big to fail,’ but for government’s they are still ‘too big to jail’. This DPA turned out to be a typical arrangement with HSBC.

As with other serial offenders, I expect we’ll continue to see misconduct.

City-based financial crime analyst and banking lawyer (did not wish to be named)
This DPA has been positive in terms of focusing individuals in the financial services industry on issues such as risks and costs within a DPA.

The deal also comes about when everyone was and is learning about DPA’s – people are looking at things like what message does it send to other banks that qualify for a DPA? For example, others may not want to go down the DPA route when they look at what the HSBC DPA involved.

The one thing this DPA showed is that this is a tool that is here to stay – in the US and UK. It’s a means for regulators to monitor compliance over a number of years, rather than a one-off penalty.

– By Irene Madongo

Related topics

HSBC pays €300m to settle French tax fraud charges

US fines HSBC $175m over unsafe foreign exchange trading

Australia establishes deferred prosecution agreements

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