DoJ launches investigation into HSBC’s American arm
HSBC’s American operations are being investigated by the US Department of Justice (DoJ) and a string of other federal agencies over allegations it has been involved in money-laundering.
The investigations – for which the bank has already received subpoenas and other requests for information – centre on the bank’s global banknotes business and its “foreign correspondent” unit, which both essentially move money around the world for clients.
The authorities are also looking at whether HSBC complied with the Bank Secrecy Act and the Office of Foreign Asset Control requirements.
Agencies involved in the investigations, besides the DoJ, include the US Attorney’s office, the Office of the Comptroller of the Currency, and the Federal Reserve Bank of Chicago. HSBC has only received requests for information from the DoJ and the Attorney’s Office.
The investigations were disclosed in a regulatory filing made by HSBC USA to the Securities and Exchange Commission (SEC), the US’s principal financial regulator.
In the filing the bank admitted it was likely “formal enforcement action” would begin, and added: “We are unable at this time to determine the terms on which these matters will be resolved, the timing of any formal enforcement action, or the amount of fines or penalties, if any, that may be imposed by the regulators or agencies.”
If found to have broken the law, a fine is the most likely penalty.
HSBC stressed it was “working with regulators and agencies to resolve this”.
The bank’s global banknotes business moves money around the world on behalf of its clients, often from central bank to major domestic banks. A decision had already been taken to close the notes business however, although it is not known if this was taken before or after the investigation began. The foreign correspondent unit is involved in transmitting company funds to countries where they do not have bank accounts.
HSBC said that as a response to the accusations, it has taken “several initial steps to address the concerns of our regulators by enhancing risk management and strengthening processes and the supporting infrastructure” in its bank secrecy and money laundering businesses.
However it remains unclear exactly what is being investigated, with the bank declining to say whether it is related to its actions in specific countries or with specific clients.
Earlier this year, Senator Carl Levin said he intended to refer the bank to regulators over its connection to questionable accounts for Angolan officials.
And it is understood that the DoJ has already opened a separate criminal investigation as to whether certain American clients of the banks failed to notify tax authorities of offshore accounts.
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