The U.S. Federal Reserve ended a 10-year enforcement action against HSBC Holdings (NYSE:HSBC) PLC. Under the action, Europe’s biggest bank by assets was told to change its ways after breaking rules about money laundering and sanctions.
In 2012, the U.S. Department of Justice (DOJ) said that “stunning failures of oversight” made HSBC, which is based in London, a “preferred financial institution” for Mexican and Colombian drug cartels and other bad people.
The bank agreed to pay a then-record $1.92 billion in fines and follow a business improvement order after admitting it didn’t have an effective programme against money laundering and didn’t do basic due diligence on some of its account holders.
The bank said in a statement, “Over the past ten years, HSBC employees have worked hard to improve the bank’s financial crime risk management.”
“We are happy that the Federal Reserve has decided to end the 2012 consent order, and we are still committed to fighting financial crime.”
In a statement released Thursday, the Fed said that the enforcement order ended on August 26.
“It doesn’t have much of an effect on HSBC,” said Daniel Tabbush, an independent Asian banking analyst for SmartKarma.
“The bank must watch how aggressively it lends to China’s wholesale banking.” Hong Kong and the U.K. are two of the bank’s most important markets.
The deal’s completion gets rid of a possible regulatory obstacle for HSBC, which was trying to reduce its presence in a number of North American areas where it had trouble competing with stronger local firms.
The bank pulled out of U.S. mass-market retail banking in May 2017. It sold some money-losing firms and closed others. This long-awaited shift emphasised Asia.
HSBC is one of many of the world’s biggest banks that have been hit with huge fines in the US for not catching illegal money moving through their systems. This has caused many of them to spend a lot of money to improve their compliance.
After settling with the DoJ and other U.S. and foreign regulators, Goldman Sachs Group Inc. (NYSE:GS) agreed to pay $2.9 billion in 2020 for its part in a corruption scandal involving Malaysia’s 1MDB.