HSBC and Justice Department Still Negotiating Over a Corporate Monitor
By Douglas Gillison | February 22, 2013 6:21 pm

More than two months since both sides reached a $1.9 billion settlement over sprawling money laundering accusations, the Justice Department said Thursday it had yet to reach an agreement with HSBC Holdings plc on who will monitor the British banking giant’s legal compliance.

The delay meant the selection process had outlasted an agreed-upon timetable and could indicate that the Justice Department was not satisfied with candidates initially proposed by HSBC.

The bank and its U.S. arm in December admitted responsibility under the Bank Secrecy Act and other statutes for money laundering violations by moving billions of dollars through the U.S. financial system for Mexican drug cartels and countries subject to trade sanctions such as Iran, Burma, Sudan, Libya and Cuba.

The decision to spare the company from criminal prosecution has inspired outrage on Capitol Hill and among the public.

According to the terms of a deferred prosecution agreement filed on Dec. 11, a compliance monitor to oversee HSBC’s future conduct was to be chosen within 60 calendar days of the agreement’s filing.

The 60-day period, which did not set a hard deadline, would have lapsed on Feb. 9. However Justice Department spokeswoman Rebekah E. Carmichael said Thursday that the selection was “still in process.”

“We continue to implement the agreement with the government,” Rob Sherman, an HSBC spokesman, said in an e-mail. He declined to comment further.

Under the terms of the agreement, HSBC was to nominate three proposed monitors that met criteria for expertise, experience, resources and independence within the first 30 days, or by Jan. 10.

If the Justice Department were unsatisfied, HSBC would then nominate a new pool of candidates in the following ten days.

“The process shall continue until a monitor acceptable to both parties is chosen,” the agreement stated.

The five-year monitorship will require an outside firm to evaluate the effectiveness of internal controls and procedures maintained by HSBC Holdings and its global network of affiliates. Monitorships are lucrative for the outside lawyers who are hired to conduct them, but considered intrusive by the companies subject to them. Companies pay the monitor’s fees.

With assets of $2.5 trillion and profits of $16.2 billion, HSBC was ranked in April 2012 as the world’s sixth-largest publicly held company, according to Forbes.


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