Senior U.S. Department of Justice officials overruled internal recommendations to prosecute global bank HSBC for money-laundering violations because of concerns about the stability of the financial system, according to a congressional report released ...
Senior U.S. Department of Justice officials overruled internal recommendations to prosecute global bank HSBC for money-laundering violations because of concerns about the stability of the financial system, according to a congressional report released on Monday.
In 2013, the Financial Services Committee of the U.S. House of Representatives, led by Jeb Hensarling, a Republican of Texas, began investigating the Justice Department's November 2012 decision to enter into a $1.92 billion settlement agreement with HSBC.
The report, which relies on internal records from the Department of the Treasury, said the U.S. attorney general at the time, Eric Holder, "misled" Congress about the Justice Department's reasoning for declining to prosecute.
Holder and other top officials decided against criminal charges for London-based HSBC over the recommendations of prosecutors because they had concerns about financial stability, the report said.
Politicians and others have criticized the Justice Department for not sufficiently cracking down on big banks following the 2008 financial crisis. The report said it sought to shed light on the department's decision-making and did not outline specific recommendations.
The 2012 settlement detailed how Mexico's Sinaloa drug cartel and Colombia's Norte del Valle cartel laundered $881 million through HSBC and a Mexican unit and how the bank violated U.S. sanctions laws by doing business with customers in Iran, Libya, Sudan, Burma and Cuba.
The financial district in London.
No HSBC executives or employees were prosecuted for the violations, the report said.
HSBC declined to comment on the report. The Treasury Department also declined to comment.
Justice Department spokesman Peter Carr said a series of factors are weighed when determining how to resolve a case, including "adverse consequences for innocent third parties, such as employees, customers, investors, pension holders and the public." He said U.S. District Judge John Gleeson approved the agreement.
Internal emails cited in the report show the Justice Department's Asset Forfeiture and Money Laundering Section, represented by then-chief Jennifer Shasky Calvery, was "considering seeking a guilty plea from HSBC" as early as September 2012.
Shasky Calvery earlier this year joined HSBC in a senior global financial crime-fighting role, a source familiar with her plans told Reuters in April.
Senior leadership at the Justice Department, including Holder, ultimately overruled criminally charging the bank, even though Holder had testified in front of Congress that "banks are not too big to jail," the report said. A spokesman for the law firm where Holder now works said he declined to comment.
The report also claims that the involvement of the United Kingdom's Financial Services Authority influenced the Justice Department's decision to settle the case.
"George Osborne, Chancellor of the Exchequer, the UK's chief financial minister, intervened in the HSBC matter by sending a letter to Federal Reserve Chairman Ben Bernanke ... to express the UK's concerns regarding U.S. enforcement actions against British banks," the report said.
On Tuesday, Bank of England Governor Mark Carney denied the U.K. central bank intervened in the matter.
"HSBC is under a deferred prosecution agreement in conjunction with a fine â€¦ we did not intervene with the (U.S.) Justice department," he told a U.K. Treasury Committee hearing.
Carr said the Justice Department routinely seeks input on the impact of prosecutions from subject-matter experts, "such as domestic and foreign regulators." He said final decisions are based on the unique facts of each case.
Britain's finance ministry declined to comment.
The Congressional report said both the Justice Department and Treasury did not comply with the committee's request for documents, forcing them to issue subpoenas.
As part of HSBC's agreement with the U.S. government, the bank installed an outside monitor, former prosecutor Michael Cherkasky, to improve its anti-money laundering controls. A court heard in April that despite progress, HSBC was still not doing enough to thwart money laundering.
â€”With contribution from CNBC's Katy Barnato. Follow CNBC International on Twitter and Facebook.
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