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The Chief Officers' Network - your business advantage / Industries / Media & Publishing / Media: Media fail in their responsibility to accurately report HSBC and Standard Chartered cases

Let's make one thing clear right at the outset: neither HSBC nor Standard Chartered have been fined by any of the US government agencies conducting and concluding their investigations.

True, they have, under various agreements, undertaken to pay substantial sums to a mix of agencies and regulators.

But those payments are civil penalties and forfeits.

They are not, emphatically not, "fines."

A "fine" arises where there is a criminal conviction or, in certain narrowly defined cases, regulatory proceedings where there is a finding of wrongdoing in a tribunal.

Neither HSBC nor Standard Chartered have, in the cases concluded this week, been convicted of any criminal offencel.

However, media reports consistently - and wrongly - refer to the penalties as "fines."

The US Department of Justice, in a statement issued 11 December, 2012, said that HSBC Holdings PLC and HSBC Bank USA N.A. have " agreed to forfeit" USD 1,256 million. The DoJ said "A four-count felony criminal information was filed today in federal court in the Eastern District of New York charging HSBC with wilfully failing to maintain an effective anti-money laundering (AML) [system], wilfully failing to conduct due diligence on its foreign correspondent affiliates, [breaching] IEEPA and [breaching] TWEA. HSBC has waived federal indictment, agreed to the filing of the information and has accepted responsibility for its criminal conduct and that of its employees. "

Civil penalties amounting to USD665 million are to be paid to regulators: USD500 million to the Office of the Comptroller of the Currency (OCC) and USD165 million to the Federal Reserve Bank.

But the proceedings have been adjourned upon the making of a "deferred prosecution agreement" or DPA.

There is no doubt that, on the facts as presented by DoJ, HSBC had catastrophic failures in its systems both in relation to money laundering and in relations to sanctions compliance. What is also clear, from the DoJ statement that HSBC deliberately acted in breach of US Sanctions against, especially, Iran - at a time when to do so was entirely legal in the UK where the bank is head-quartered and primarily regulated.

District Attorney Richard A Brown said "Hopefully, as a result of this historical settlement, we have gained the attention of not only HSBC but that of every other major financial institution so that they cannot turn a blind eye to the crime of money laundering.

But that, aside from the fact that Brown meant "historic" not "historical" is also misleading. HSBC had admitted to criminal conduct. But it is not "a crime" unless there is a conviction and that, provided HSBC satisfy the various departments and agencies of its compliance with the DPA is not going to happen. Again, sloppy use of language has created a misleading impression, this time perhaps for political purposes.

Similarly the settlement reached by Standard Chartered with various agencies and departments in addition to the previously reported settlement with the New York Department of Financial Services.

In announcing the settlement with Standard Chartered on 10th December 2012, the DoJ said "A criminal information was filed today in federal court in the District of Columbia charging Standard Chartered Bank with one count of knowingly and wilfully conspiring to [breach] IEEPA. Standard Chartered Bank has waived the federal indictment, agreed to the filing of the information and has accepted responsibility for its criminal conduct and that of its employees.

Again, the proceedings were adjourned on the making of a DPA. In this case, StanChart agreed to forfeit USD227 million to the DoJ and New York State criminal investigators, OFAC and the Federal Reserve - despite being regulated in New York, hence the settlement with the NYDFS. The sum includes USD132 to be paid to OFAC.

None of the authorities refers to a fine.

And that is important for the word "fine" means that the banks have been convicted of a criminal offence. And they have not.

The media should know better than to imply such; after all, to state or imply that a person has been convicted of a criminal offence when that is not true is, prima facie, a libel. And if the media cannot be trusted with the correct use of language, that's shameful.


Nigel Morris-Cotterill is Head, The Anti Money Laundering Network, ultimate owner of ChiefOfficers.Net








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