Report: DOJ quashed advice to prosecute HSBC

Officials feared criminal charges against bank could endanger financial system

Top Department of Justice officials overruled staffers’ recommendations to prosecute HSBC Holdings in 2012, concerned that criminal charges against the British bank “would have serious adverse consequences on the financial system,” according to a report released Monday.

Prepared by the House Committee on Financial Services’ Republican staff, the report provides new details about the then-rec- ord $1.92 billion non-prosecution agreement HSBC reached with DOJ and other U.S. authorities.

The agreement came after an investigation found HSBC had violated federal laws by laundering funds from Mexican drug trafficking and processing transactions on behalf of Iran, Libya, Sudan and Burma, nations subject to U.S. economic sanctions.

The House report said the outcome was preceded by additional concerns and maneuvering:

Then- attorney general Eric Holder “misled Congress” about DOJ’s reasons for not filing charges against the bank.

A Department of the Treasury official wrote that DOJ and federal financial regulators worked at “alarming speed” to fi- nalize their enforcement action of HSBC in a bid to outpace similar action by the New York Department of Financial Services.

DOJ officials sent settlement numbers to HSBC before consulting with a Department of the Treasury office to ensure the amounts accurately reflected the full degree of the sanctions.

The United Kingdom’s Financial Services Authority was involved in the U.S. case and “appears to have hampered” the U.S. government’s investigations and influenced DOJ’s decision not to prosecute HSBC.

The report also said DOJ failed to produce records regarding the agency’s decision-making about HSBC, despite requests by the House panel and a congressional subpoena. The committee obtained copies of Treasury records that the report said showed DOJ hasn’t been “forthright” with Congress or the U.S. public.

“Rather than lacking adequate evidence to prove HSBC’s criminal conduct, internal Treasury documents show that DOJ lead- ership declined to pursue” a prosecution recommendation by the agency’s Asset Forfeiture and Money Laundering Section staff “because senior DOJ leaders were concerned that prosecuting the bank ‘could result in a global financial disaster’ — as (Britain’s Financial Services Authority) repeatedly warned,” the report said.

Since 2014 alone, several large financial institutions have pleaded guilty to misconduct, DOJ spokesman Peter Carr said. Additionally, DOJ’s decisions on potential corporate criminal cases must consider “whether the prosecution may have substantial adverse consequences for innocent third parties, such as employees, customers, investors, pension holders and the public,” Carr said.

The agency “is committed to aggressively investigating allegations of wrongdoing at financial institutions, and, along with our law enforcement partners, holding individuals and corporations responsible for their conduct.” DOJ spokesman Peter Carr