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Tuesday, July 12, 2016

Too Big To Jail: HSBC escaped money laundering charges because of market meltdown fears

Top US officials stepped back from prosecuting HSBC for money laundering in 2012 due to concerns inside the Department of Justice that it would destabilise the global financial system, said a Congressional report.

Chancellor George Osborne and other senior UK officials added to pressure by warning the US that charges against the bank could rock markets, says a report by Financial Services Committee of the House of Representatives.

London-based HSBC paid a $1.9bn (£1.5bn, €1.7bn) settlement after being accused by US authorities of letting Mexican drug cartels and Russian criminal gangs use its American operations to launder cash.

But the bank did not face criminal charges, nor were any of the lender's senior officials brought before the courts.

The report said: "George Osborne, Chancellor of the Exchequer, the UK's chief financial minister, intervened in the HSBC matter by sending a letter to Federal Reserve Chairman Ben Bernanke... to express the UK's concerns regarding US enforcement actions against British banks."

The letter said that prosecuting HSBC could have "very serious implications for financial and economic stability, particularly in Europe and Asia".

The report, which used internal records from the Department of the Treasury, said the US attorney general at the time, Eric Holder, "misled" Congress about the Justice Department's reasoning for declining to prosecute.

Holder and other top officials decided against criminal charges for HSBC over the recommendations of prosecutors because they had concerns about financial stability, the report said.

The report added senior leadership at the Department of Justice, ultimately overruled criminally charging the bank, even though Holder had testified in front of Congress that "banks are not too big to jail."

Politicians and other groups have criticised the Department of Justice for not sufficiently cracking down on big banks following the 2008 financial crisis.

HSBC's 2012 settlement detailed how Mexico's Sinaloa drug cartel and Colombia's Norte del Valle cartel laundered $881m through HSBC and a Mexican unit, and how the bank violated US sanction laws by doing business with customers in Iran, Libya, Sudan, Burma and Cuba.

The agreement with US regulators allowed the bank to avoid pleading guilty to any wrongdoing. If the lender had been proven guilty of criminal actions, it could have lost its lucrative banking charter in the US.

HSBC, US regulators and the UK Treasury declined to comment on the report, called Too Big To Jail: Inside the Obama Justice Department's decision not to hold Wall Street accountable.

Credit to Ibtimes.co.uk

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