U.S. targets bankers in HSBC laundering probe: source

Fri May 6, 2011 7:35am EDT

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ST. LOUIS, May 5 (Thomson Reuters Accelus) - The Justice Department's money-laundering probe against banking giant HSBC Holdings Plc is looking at possible prosecution of individual bankers, a source close to the investigation said on Thursday.

The source, who has direct knowledge of the probe which was disclosed last year, said it is moving slowly in part because of the close examination for potential individual prosecutions. He did not name any targeted individuals.

"I understand they are meticulously doing interviews with one primary objective driven by the Justice Department on this case, which is to identify and prosecute any individuals within the bank for which the evidence will support such an action. Prosecuting individuals is their number one priority," the source said on condition of anonymity.

The Justice Department probe is linked to bulk cash the bank received from money-changing firms in Mexico, the source said. The concern is that the bank may have handled money belonging to the Mexican drug cartels.

HSBC spokesman Rob Sherman declined to comment on the status of the investigations. "As we've indicated in our filings, we are subject to certain investigations by government authorities. In all cases, we're cooperating and seeking to resolve these matters," Sherman said.

Justice Department spokeswoman Laura Sweeney declined to comment.

The Justice Department was heavily criticized last August after reaching a deal to allow Barclays Bank to settle charges that it violated U.S. sanctions laws by forfeiting $298 million. While the federal judge overseeing the case ultimately approved the pact, he first dubbed it a "sweetheart deal" and questioned why the bank officials responsible were not held to account.

The judge's comments reflected a growing concern, on Capitol Hill and elsewhere, that banks found to have violated U.S. money laundering or sanctions laws can absolve themselves by simply writing a check. The concern is that such a system makes these payments a cost of doing business and does not deter such crimes.

In October, a group of federal regulators disclosed enforcement actions against HSBC North American Holdings Inc and HSBC Bank USA. The regulators obliged the bank to improve its compliance risk-management program, including its anti-money laundering compliance regime, but did not at the time issue a fine.

One of the regulators involved, the Office of the Comptroller of the Currency, stated that the bank "had deficiencies with respect to suspicious activity reporting, monitoring of bulk cash purchases and international funds transfers, customer due diligence concerning its foreign affiliates, and risk assessment with respect to politically-exposed persons and their associates."

The regulatory order came after U.S. Senator Carl Levin said in February 2010 he was referring HSBC Holdings to its U.S. bank regulator in connection with questionable accounts it provided for senior Angolan officials.

Levin, chairman of the Permanent Subcommittee on Investigations, said he was referring the issue to the Office of the Comptroller of the Currency, an arm of the U.S. Treasury, because he was concerned that tainted foreign money might be flowing into the United States.

It is not known whether the Angolan concerns were also under scrutiny in the Justice Department probe.

HSBC exited the global banknotes business last year and said it had taken steps to improve its anti-money laundering compliance regime.

In a November filing with the Securities and Exchange Commission, HSBC stated that it remained "the subject of ongoing inquiries, including grand jury subpoenas and other requests for information, by government agencies, including the US Attorney's Office and the U.S. Department of Justice."

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