HSBC's record penalty over laundering
GLOBAL bank HSBC is expected to pay US authorities a record $US1.9 billion to settle allegations that its failure to enforce anti-money laundering rules left the US financial system exposed to drug cartels.
It is thought US authorities decided against indicting HSBC over concerns that criminal charges could jeopardise one of the world's largest banks and destabilise the global financial system.
HSBC faces accusations that it transferred billions of dollars for nations including Iran and enabled Mexican drug cartels to move money illegally through its US subsidiaries.
While the settlement is a victory for the US government, the case also raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict.
Behind the scenes, authorities debated for months the merits of a criminal indictment against HSBC.
Some prosecutors at the US Justice Department's criminal division and the Manhattan district attorney's office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, which requires financial institutions to report cash transaction of $US10,000 or more and to bring dubious activity to the attention of regulators.
Treasury officials and regulators at the Federal Reserve and the Office of the Comptroller of the Currency warned against an aggressive stance, according to the officials briefed on the matter.
When approached by the Justice Department for their thoughts, the regulators cautioned about the impact of indictments on the broader economy.
After months of discussions, prosecutors decided against a criminal indictment, but only after securing record penalties and wide-ranging sanctions. The HSBC deal, which was due to be filed in the Eastern District of New York on Tuesday, includes a deferred prosecution agreement with the Manhattan attorney's office and the Justice Department.
The deferred prosecution agreement, a notch below a criminal indictment, requires the bank to forfeit more than $US1.2 billion and pay about $US650 million in fines. NEW YORK TIMES