British banks close to settling US money-laundering charges

 

Two of Europe's largest banks are close to handing over a total of more than $2 billion to resolve allegations that they flouted US anti-money-laundering laws, according to officials and people familiar with the matter.

The twin investigations are part of a stepped-up effort by federal prosecutors and regulators to clamp down on funding sources for drug traffickers, terrorists and countries under sanction. But the lack of criminal prosecutions has left some analysts skeptical about whether fines alone will deter this behavior.

"Until bank officials that knowingly violate anti-money-laundering laws are held criminally liable, we're not going to see rigorous compliance with federal regulations," said James Gurule, a former undersecretary of enforcement for the Treasury.

On Thursday, Standard Chartered Bank said that it expects to pay $330 million to settle all pending cases of alleged violations of U.S. sanctions. The Justice Department and banking regulators have been investigating whether the London-based bank laundered money on behalf of Iranian banks and companies.

Another London-based bank, HSBC, faces a $1.8 billion fine for allegedly helping clients with ties to drug trafficking and terrorists gain access to the U.S. financial system, Reuters reported Thursday.

Global banking giants, including Barclays, Credit Suisse and Lloyds, have been hit with massive fines and penalties for ignoring U.S. sanctions. Many of these banks have faced criminal and civil charges, but prosecutors have yet to put senior executives or even mid-level employees on trial.

Daniel Karson, chairman of corporate investigations firm Kroll Advisory Solutions, said high fines will encourage banks to be more vigilant. No bank, he said, wants to face damage to its reputation, as that could hamper its operations.

"The government is getting some pretty significant settlements," he said. "If you get a consent order and a major civil prosecution and the payment of a huge fine, you're ahead of the game."

Karson said the trouble is that banks say they will comply with anti-money-laundering statutes but also give employees incentives to pursue big business opportunities.

"Banks are up against a system of incentives which at times flies in the face of compliance. If someone's bonus is based upon how much business they bring in, they may let some accounts slide," he said.

That's precisely why it is crucial for prosecutors to go after individuals to hold them up as examples, Gurule said.

In HSBC's case, the bank is entering into a deferred prosecution deal, whereby it could delay or forgo criminal prosecution in exchange for paying a fine, admitting wrongdoing and improving its compliance controls, according to a person familiar with the matter who spoke on condition of anonymity because the agreement has not been finalized. If the bank runs into more trouble in the future, the Justice Department could prosecute.

A spokesperson at HSBC said that "the nature of any discussion is confidential."

HSBC told investors in November that it increased its reserves by $800 million, to $1.5 billion, to cover potential fines, settlements and other costs related to the money-laundering probe. At the time, the bank said the final expenses could be significantly higher than that amount.

Allegations of misconduct at HSBC came to light earlier this year when the Senate permanent subcommittee on investigations released a report accusing the bank of laundering money for Mexican drug cartels and organizations that financed terrorism.

In one instance, the yearlong Senate investigation found that HSBC employees in Mexico transported $7 billion to affiliates in the United States in one year, raising red flags that the money was derived from drug deals in the United States.

Legal experts say it is difficult to prove criminal liability in these kinds of cases because it is often unclear whether bank employees or managers intentionally ignored the law. But others argue that there should be no trouble indicting bank officials who air their dirty deeds in e-mails, as executives did at Standard Chartered.

According to New York's financial regulator, who first leveled charges against Standard Chartered in August, one of its executives said in an e-mail: "You . . . Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians."

New York regulators accused the British bank of scheming with the Iranian government to launder $250 billion from 2001 to 2007. The case was settled for $340 million over the summer as federal regulators forged ahead with their own case.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Lou Reed distorted the truth about his upbringing, and since his death in 2013, biographers and memoirists have added to the myths
musicThe truth about Lou Reed's upbringing beyond the biographers' and memoirists' myths
News
people
News
Ed Miliband received a warm welcome in Chester
election 2015
Life and Style
Apple CEO Tim Cook announces the Apple Watch during an Apple special even
fashionIs the Apple Watch for you? Well, it depends if you want it for the fitness tech, or for the style
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Project Implementation Executive

£18000 - £23000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Chiropractic Assistant

£16500 per annum: Recruitment Genius: A Chiropractic Assistant is needed in a ...

Recruitment Genius: Digital Account Executive - Midlands

£18000 - £26000 per annum: Recruitment Genius: They work with major vehicle ma...

Recruitment Genius: Web Developer

£28000 - £30000 per annum: Recruitment Genius: This company provides coaching ...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own