HSBC Draws Line under its Cartel Case in Mexico

HSBC, a British multinational banking and financial services holding company, drew a line under its punishment for lapses in anti-money laundering controls on Monday, stating that the U.S. Department of Justice would end its deferred prosecution agreement, lifting the threat of further penalties.

HSBC, the biggest bank in Europe, drew line under it Cartel Case in Mexico.

The biggest bank in Europe paid a $1.9 billion fine and entered into the five-year deal in 2012 for failing to prevent Mexican drug cartels from laundering hundreds of millions of dollars.

Under the deal, HSBC pledged to strengthen its sanctions and anti-money laundering controls. The banking and financial services company stated that it had successfully done this and the Department of Justice will file a motion to dismiss the charges that had been deferred by the agreement.

“While we still have improvements to make and work to do, this shows the DPA has worked in the way intended which was to lead to a transformation in the way HSBC manages financial crime risk,” stated Stuart Levey, a Chief Legal Officer at HSBS.

In a deferred prosecution agreement, a prosecutor grants an amnesty in exchange for the defendant agreeing to fulfill certain requirements, including the payment of a fine and a pledge to avoid further bad behavior.

Mexican authorities told the CEO of HSBC’s Mexico unit that a local drug lord referred to the bank as the “place to launder money.”

A document in the case showed that the lax money laundering controls at HSBC allowed two cartels, one each in Mexico and Colombia, to move $881 million in drug proceeds through the bank over the second half of the last decade.

After its signing of the DPA in 2012, HSBC embarked on a worldwide program of upgrading its compliance systems to the U.S. standards, raising its expenses to more than $1 billion a year.

As part of the deal with the U.S. Prosecutors and Britain’s Financial Conduct Authority, HSBC also installed an independent monitor charged with producing annual reports on the progress of its reforms on fighting financial crime.

On Monday, the bank stated that its monitor, former U.S. district attorney and financial crime expert Michael Cherkasky, would continue in his FCA capacity for an unspecified period of time.

Meanwhile, the shares of HSBC rose 2.5 percent, the most among major European banks, as the STOXX European index of 600 lenders went up 0.28 percent.

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