Fed Issues Consent Cease and Desist Order, Assesses Civil Money Penalty Against HSBC

Dec 12 - The Federal Reserve Board has issued a consent cease and desist order against HSBC Holdings plc, London, United Kingdom, and assessed a $165 million civil money penalty against Holdings and its subsidiary in the United States, HSBC North America Holdings Inc., New York, N.Y. The civil money penalty is the largest the Federal Reserve has assessed as a result of unsafe and unsound practices related to insufficient compliance with Bank Secrecy Act and anti-money laundering requirements, and U.S. economic sanctions.   

Holdings conducts its banking operations in the United States through HNAH, which owns and controls HSBC Bank USA, N.A., and various other bank and non-bank subsidiaries. 

The orders address inadequate oversight by Holdings and HNAH of anti-money laundering controls and U.S. dollar clearing practices used by the firm's banking subsidiaries in the United States and abroad. A government investigation found that due to these oversight deficiencies, Holdings' banking subsidiary in Mexico engaged in a substantial number of high-risk transactions with the firm's subsidiary bank in the United States. Investigations also found compliance gaps at the firm's subsidiaries in Europe and the Middle East that enabled sanctioned entities to illegally route dollar payments through the U.S. financial system.

When combined with separate, coordinated actions by the Department of Justice, the District Attorney for the County of New York, and the Office of the Comptroller of the Currency, the payments made by Holdings, HNAH, and HBUS in forfeitures and penalties in connection with the money-laundering and sanctions violations total approximately $1.9 billion. Separate assessments by the Treasury Department's Office of Foreign Assets Control and Financial Crimes Enforcement Network will be deemed satisfied by payments made to other federal agencies.

The Federal Reserve's order requires Holdings to improve its programs and practices to ensure full compliance with the Bank Secrecy Act, anti-money laundering requirements, and U.S. economic sanctions. The United Kingdom's Financial Services Authority, the home country supervisor of Holdings, has agreed to assist the Federal Reserve in the supervision of the order.