Fed Ends Decade-long Enforcement Action Against HSBC

Fed Ends Decade-long Enforcement Action Against HSBC

SINGAPORE (Reuters) -The U.S. Federal Reserve has terminated a decade-long enforcement action against HSBC Holdings PLC under which Europe’s biggest bank by assets was ordered to improve practices after violating money laundering and sanction rules.

London-headquartered HSBC was accused in 2012 of degenerating into a “preferred financial institution” for Mexican and Colombian drug cartels and other wrongdoers through what the U.S. Department of Justice (DoJ) called “stunning failures of oversight”.

The bank agreed to pay a then-record $1.92 billion in fines and abide by a business improvement order after acknowledging it failed to maintain an effective program against money laundering and conduct basic due diligence on some of its account holders.

“Over the last decade HSBC’s employees have worked hard to transform the bank’s financial crime risk management capabilities,” the bank said in a statement.

“We are pleased with the Federal Reserve’s decision to terminate the 2012 consent order and remain committed to our efforts to combat financial crime.”

The enforcement order ended on Aug. 26, the Fed said in a statement on Thursday.

“I do not feel it changes anything fundamentally for HSBC,” said Daniel Tabbush, an independent Asian banking analyst who publishes on Smartkarma.

“The bank must have its focus on its aggressive lending into China wholesale banking… The bank’s other focus will be the worsening outlook in its other key markets, Hong Kong and the U.K.”

The termination removes a potential regulatory overhang for HSBC, which has been trying to shrink its presence in some North American markets where it has struggled against competition from larger domestic players.

In May last year, the bank announced it was withdrawing from U.S. mass market retail banking by selling some parts of its money-losing business and winding down others in a long-awaited move as the lender stepped up a shift in focus to Asia.

HSBC is one of several of the world’s biggest banks to have been hit with massive fines in the United States for failing to catch unlawful proceeds moving through their systems, leading many to invest significantly to improve compliance.

In 2020, Goldman Sachs Group Inc agreed to pay $2.9 billion over its role in a corruption scandal involving Malaysia’s 1MDB after reaching a settlement with the DoJ and other U.S. and overseas regulators.

(Reporting by Anshuman Daga in Singapore, Scott Murodch in Hong Kong and Shivani Tanna in Bengaluru; Editing by Christian Schmollinger and Christopher Cushing)