WASHINGTON, D.C.: The US attorney general quashed staff proposals to prosecute banking giant HSBC over money laundering in 2012 because of worries about the global financial system, a congressional report said Monday.
While the US did eventually fine the British bank $1.92 billion for intentionally breaking US sanctions in doing business with Iran, Libya, Sudan, Cuba and Myanmar, it could have prosecuted HSBC criminally for “blatant” violations of US laws, the report said.
Entitled “Too Big to Jail,” the report from the House of Representatives Financial Services Committee alleges that the London-based banking giant, ranked seventh in the world by Forbes, got off easily from the Department of Justice under then-attorney general Eric Holder.
The bank had been accused of allowing notorious drug traffickers and officials and organizations of regimes blacklisted by the US government to launder money through it.
Holder overruled an internal Department of Justice recommendation to prosecute the bank and bank officials “because of DOJ leadership’s concern that prosecuting the bank would have serious adverse consequences on the financial system,” the report said.
Instead, the bank negotiated a settlement which included a five-year “deferred prosecution agreement” (DPA) that required it to pay a $1.92 billion fine and undertake organizational reforms that would ensure it does not repeat the offenses.
The shift to a deferred prosecution deal, the report said, came after pressure from Britain’s finance minister, George Osborne, who warned in a September 2012 letter that prosecuting such a large bank could pose “very serious implications for financial and economic stability, particularly in Europe and Asia.”
The report, mainly critical of the US justice and treasury departments in the case, also said that HSBC had been able to negotiate the agreement to soften its impact on the bank and bank management.
“Significantly for HSBC and any of its executives or employees who may have, as internal Treasury records appear to show, knowingly and willfully processed transactions during this time period with proliferators (of weapons of mass destruction), DOJ’s final DPA appears to shield from prosecution both the bank and the individuals responsible for these transactions,” the report said.
In reaction, Justice Department spokesman Peter Carr said the department “is committed to aggressively investigating allegations of wrongdoing at financial institutions” including both the companies and individuals.
However, he added, “prosecutors take into account what potential substantial collateral consequences might result from a prosecution. This includes whether the prosecution may have substantial adverse consequences for innocent third parties, such as employees, customers, investors, pension holders and the public.”