March 16, 2015 / 5:36 PM / 4 years ago

U.S. warns banks it may revoke some money-laundering settlements

HOLLYWOOD, Fla. (Reuters) - Some banks that have non-prosecution agreements over failures to police transactions for criminal activity could see those deals withdrawn and be forced to plead guilty, a U.S. Justice Department official said on Monday.

“The criminal division will not hesitate to tear up that agreement when that action is appropriate,” Assistant Attorney General Leslie Caldwell told an Association of Certified Anti-Money Laundering Specialists conference.

The USA Patriot Act in 2001 tightened anti-money laundering laws in an effort to cut off terrorist financing. The Justice Department has since entered into non-prosecution agreements (NPAs) and deferred-prosecution agreements (DPAs) with financial institutions accused of anti-money laundering failures that allowed criminal activity to flourish.

Justice has made such deals in the last three years with HSBC Holdings Plc, Standard Chartered Plc, JPMorgan Chase & Co and Commerzbank AG. The agreements allow cases to be settled in return for fines and pledges by banks to prevent a recurrence of the violations.

Caldwell declined to name banks in danger of having deals revoked, but said she expected that to happen in some cases.

“We don’t want DPAs and NPAs to be perceived as a cost of doing business,” she said.

The agreements give the Justice Department leverage to require banks to improve their compliance programs, and go beyond a simple guilty plea to settle criminal charges, Caldwell said.

However, the Justice Department lately has seen “a number of repeat offenders,” in which banks with agreements still in force “engaged in additional criminal activity,” Caldwell said.

“Just as an individual on probation faces a range of potential consequences for a violation of probation, so too does a bank or (other) financial institution that breaches a deferred prosecution agreement or a non-prosecution agreement,” Caldwell said.

She cited the Justice Department’s recent extension of an agreement with Standard Chartered as necessary to “investigate some new facts.”

In some cases Justice may impose a new fine or require more remedial compliance measures, she said. “And in the appropriate case, we can pursue criminal charges based on the (original) conduct.”

When a bank enters into an NPA or DPA, it must admit facts “that constitute the elements of a criminal offense,” Caldwell said. The Justice Department can thereby “essentially require a company plead guilty, or they can go to trial.”

Reporting by Brett Wolf of Thomson Reuters Accelus; here; Editing by Randall Mikkelsen and Lisa Von Ahn

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