The Senate Banking Committee has scheduled a hearing next week on the Bank Secrecy Act, the once fairly dormant statute that has been increasingly used to target financial institutions for failing to detect money laundering.
The announcement follows a report on Thursday by ABC News that the committee would examine the Justice Department’s decision in December not to prosecute London-based bank HSBC, its U.S. arm or any of its officers for rampant money laundering exposed last year.
The Banking Committee would not say whether HSBC will be a focus of the March 7 hearing, entitled “Patterns of Abuse: Assessing Bank Secrecy Act Compliance and Enforcement.”
The panel issued a statement from Chairman Tim P. Johnson (D-S.D.).
“In recent years, a number of very large international banks have been assessed penalties totaling well over $5 billion for [Bank Secrecy Act/Anti-Money Laundering] violations, or related violations of foreign sanctions rules administered by the Treasury Department,” the statement said. “Additionally, several large American banks have been the subject of cease-and-desist orders recently because of seemingly widespread breakdowns in their BSA/AML systems.”
HSBC Holdings plc and its U.S. subsidiary HSBC Bank USA N.A., agreed to pay $1.92 billion to settle allegations the bank had laundered money for Mexican drug cartels and facilitated transactions for sanctioned countries including Iran and Libya. The subsidiary was charged in a criminal information with violations of the Bank Secrecy Act and other statutes for failing to detect money laundering and facilitating transactions for sanctioned countries.
HSBC entered into a deferred prosecution agreement — meaning it will not be prosecuted — if it takes required actions to improve compliance and avoid a repeat of the violations.
The bank was not accused directly of money laundering violations, a more serious charge that could have resulted in the loss of its federal charter to operate in the United States.
Scheduled to appear at the hearing are David S. Cohen, undersecretary for terrorism and financial intelligence, Thomas J. Curry, Comptroller of the Currency, and Jerome H. Powell, governor of the Federal Reserve Board.
The hearing will be Curry’s second appearance before the committee in less than a month. Curry was one of several financial regulators to testify at Feb. 14 hearing, in which newly elected Massachusetts Sen. Elizabeth A. Warren, a Democrat, created a crowd-pleasing — though somewhat misleading — moment that has been widely viewed on Internet video and could foreshadow the tenor of next week’s hearing.
Warren asked Curry when his office had taken a bank to trial. “We have not had to do it as a practical matter to achieve our supervisory goals,” Curry told Warren. (The OCC is a regulatory agency that can levy fines but not directly pursue criminal charges; the Justice Department prosecutes banking violations.)
Main Justice in December published an analysis of the Bank Secrecy Act by former Justice Department criminal Fraud Section Assistant Chief Robertson Park. The analysis can be read here.
