WASHINGTON – HSBC Holdings plc (HSBC Group) – a London-based UK company – and HSBC Bank USA N.A. (HSBC Bank USA) (HSBC Group) – a state-owned banking company headquartered in McLean, Virginia – has agreed to lose $1.256 billion and reach an agreement with the Department of Justice to defer prosecution for HSBC`s bank secrecy act (BSA) offences. the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). According to the Court documents, HSBC Bank USA violated the BSA by avoiding to maintain an effective anti-money laundering program and by conducting due diligence with respect to its foreign correspondent account holders. HSBC Group violated IEEPA and TWEA by conducting illegal transactions on behalf of clients in Cuba, Iran, Libya, Sudan and Burma, all countries that were sanctioned by the Office of Foreign Assets Control (OFAC) at the time of the transactions. UK-based global financial services firm HSBC Holdings plc (HSBC) has reached a Deferred Prosecution Agreement (DPA) and agreed to pay a fine of $63.1 million and $38.4 million in compensation and refunds to clarify allegations that it was involved in a fraud project to two bank customers through a multi-million dollar program, which is commonly referred to as “front running”. The DPA, which was filed in U.S. District Court for the Eastern District of New York as part of a two-way criminal fraud, is currently under review by the court. Deferred crackdown deals were rarely offered a generation ago, when the Justice Department prosecuted scammers on Wall Street and in savings and credit. From 1992 to 2002, only eight of these go-and-sin-No More agreements were concluded, according to the Duke University and University of Virginia Prosecution Registry. But prosecutors became much more cautious when it came to bringing companies to court after the collapse of the large audit firm Arthur Andersen when he was indicted for obstruction of justice in the Enron investigation. According to HSBC`s confession, on two different occasions in 2010 and 2011, traders abused confidential information provided by customers who had instructed HSBC to carry out multi-billion euro foreign exchange transactions with the participation of the British pound sterling.
After entering into confidentiality agreements with its customers, which required the bank to keep confidential the details of its planned transactions, traders at HSBC`s sterling exchange counter acted for the benefit of the traders and hsbc for their own profit on their “proprietary” HSBC accounts. HSBC traders then ensured that large transactions were made in a way that should steer the price of the pound in a direction that benefited HSBC and hurts its customers. HSBC also misrepresented one of the customers, Cairn Energy, to hide the selfish nature of its actions. In total, HSBC admitted to having made a profit of approximately $US 38.4 million in the first transaction in March 2010 and approximately $US 8 million in the Cairn Energy transaction in December 2011. In a statement, HSBC said: “The behaviour described in the agreement occurred in 2010 and 2011. In addition to the $1.256 billion loss under its Deferred Prosecution Agreement (DPA) with the Department of Justice, HSBC also agreed to pay $665 million in civil penalties – $500 million to the Currency Accounting Office (OCC) and $165 million to the Federal Reserve – for violating the AML program.