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Grassley rips Justice Department for handling of HSBC officials

- The Washington Times - Friday, December 14, 2012

The ranking Republican on the Senate Judiciary Committee has described as "inexcusable" a decision by the Justice Department to forego any criminal prosecution of HSBC officials in an elaborate conspiracy to launder millions in illegal cash.

In a letter to Attorney General Eric H. Holder Jr., Sen. Chuck Grassley of Iowa complained that the Justice Department — in accepting a $1.92 billion settlement in a money-laundering probe by federal and state authorities in the United States — had not prosecuted a single HSBC employee, "no executives, no directors, no AML [anti-money laundering] compliance staff members, no one."

"Even more concerning is the fact that the individuals responsible for these failures are not being held accountable," he wrote. "By allowing these individuals to walk away without any real punishment, the department is declaring that crime actually does pay. Functionally, HSBC has quite literally purchased a get-out-of-jail-free card for its employees for the price of $1.92 billion dollars."

On Friday, the British banking giant agreed to the settlement in an investigation that had focused on the transfer of billions of dollars on behalf of nations such as Iran, which are under international sanctions, and the transfer of money through the U.S. financial system from Mexican drug cartels. The bank, Britain's largest by market value, will pay $1.25 billion in forfeiture and $655 million in civil penalties under what is known as a deferred prosecution agreement. HSBC is accused of violating the Bank Secrecy Act and the Trading With the Enemy Act.

"What I have seen from the department is an inexplicable unwillingness to prosecute and convict those responsible for aiding and abetting drug lords and terrorists," Mr. Grassley said. "I cannot help but agree with an editorial in the New York Times that 'the government has bought into the notion that too big to fail is too big to jail.'

"This troubling lack of real enforcement will have consequences for the health of our economy and the safety and prosperity of the American people," he said.

Mr. Grassley said the Justice Department's failure to hold people criminally accountable appears to be a continuation of the department's apparent policy to prosecute and hold accountable as few as possible of Wall Street's main players who in large part were responsible for the financial crisis.

He previously has questioned the department about the number of mortgage fraud cases the department has brought forward.

In July, the Senate permanent subcommittee on investigations held a hearing on HSBC's operation, concluding that the bank had used its U.S. bank as a "gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules."

Committee Chairman Sen. Carl Levin, Michigan Democrat, said that due to poor anti-money-laundering controls, HSBC's U.S. division "exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."

Mr. Grassley said that despite its "egregious criminal conduct," the Justice Department's Deferred Prosecution Agreement (DPA) with HSBC failed in finding the proper punishment for the bank or its employees. Under its terms, he said, the DPA obligates HSBC to pay $1.92 billion to the federal government, improve its internal AML controls, and submit to the oversight of an outside monitor for five years.

"Despite the fact that this is a record settlement for a bank as gigantic as HSBC, this is hardly even a slap on the wrist," Mr. Grassley said, noting it amounted to between 9 percent and 11 percent of HSBC's profits last year alone and was "a bare fraction of the sums left unmonitored."

Even more concerning, he said, was the fact that bank officials responsible for the failures were not being held accountable.

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