Troubled banking giant HSBC continues to face questions about its ability to block transactions that facilitate law breaking.
The challenges faced by the bank were highlighted in a report by the Guardian based on comments allegedly made in the last three months by HSBC’s global head of sanctions, Lee Hale, who reportedly conceded that further regulatory breaches were likely.
The Guardian said it had heard audio of a confidential meeting Hale had with independent lawyers monitoring HSBC as part of a 2012 deal with the U.S. Department of Justice, which allowed the bank to pay a $1.9 billion fine and submit to monitoring in exchange for deferred prosecution for the actions of its Mexican branch in laundering millions of dollars in drug cartel money.
According to the Guardian, HSBC said in a statement that it did not recognize the comments in the recording and also said the comments had been taken out of context.
Though Hale said the bank had made progress in updating compliance procedures and strengthening report and financial controls, according to the Guardian he also said that “given the size and scale of HSBC,” in his view, “it is a cast-iron certain[ty] this will happen, at some point in the future we’re going to have some big breach, some regulatory breach.” He added, “I hope it doesn’t happen, but it is likely.”
The Guardian story appeared just a day after the Justice Department filed its summary of findings by Michael Cherkasky, the independent monitor appointed to keep an eye on HSBC’s operations after the 2012 plea deal. The letter filed in federal court in Brooklyn was signed by U.S. Attorney Loretta E. Lynch, who is awaiting confirmation as President Barack Obama’s choice to be U.S. Attorney General. The letter noted improvements at the bank. But the letter also said, “in certain instances, the Monitor believes that HSBC Group’s progress has been too slow.”
The letter noted that Cherkasky identified two of the biggest barriers to change as “its corporate culture and its compliance technology.”