This is not an opinion piece; at least it is written simply in the form of a timeline, and for the most part it uses the words of the principals where possible (or provides primary sources to be read, or heard/watched by the reader), or of official reports, or of news reports. It offers no comment. It draws no conclusions. The conclusions I leave the reader to draw for him or herself.
10th September and 9th October, 2012
September: Letter from the Chancellor, George Osborne to Ben Bernanke, Chairman US Federal Reserve, regarding the possible prosecution of HSBC by the US Department of Justice (DOJ); followed by an October meeting between Osborne and Bernanke to discuss the contents of the letter. Source references and context will be given below.
11th December, 2012 (Reuters report)
“HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses.
Mexico’s Sinaloa cartel and Colombia’s Norte del Valle cartel between them laundered $881 million through HSBC and a Mexican unit, the U.S. Justice Department said on Tuesday.
In a deferred prosecution agreement with the Justice Department, the bank acknowledged it failed to maintain an effective program against money laundering and failed to conduct basic due diligence on some of its account holders.
Under the agreement, which was reported by Reuters last week, the bank agreed to take steps to fix the problems, forfeit $1.256 billion, and retain a compliance monitor. The bank also agreed to pay $665 million in civil penalties to regulators including to the Office of the Comptroller of the Currency, the Federal Reserve, and the Treasury Department.
‘We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes,’ HSBC Chief Executive Stuart Gulliver said.
HSBC’s money-laundering lapses in Mexico and elsewhere were cited in an extensive Senate report earlier this year, but the documents filed in court on Tuesday provided new details.
Despite the known risks of doing business in Mexico, the bank put the country in its lowest risk category, which excluded $670 billion in transactions from the monitoring systems, according to the documents.
Bank officials repeatedly ignored internal warnings that HSBC’s monitoring systems were inadequate, the Justice Department said. In 2008, for example, the CEO of HSBC Mexico was told that Mexican law enforcement had a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money.
Mexican traffickers used boxes specifically designed to the dimensions of an HSBC Mexico teller’s window to deposit cash on a daily basis.” (Reuters, 11th December, 2012)
9th March 2015 (parliamenttv.live)
Westminster: House of Commons Public Accounts Select Committee (Chair: Patricia Hodge MP).
Subject: Tax avoidance and evasion: HSBC. Meeting started at 3.17pm, ended 5.27pm
Witnesses: Stuart Gulliver, Chief Executive, HSBC Holdings PLC, Chris Meares, former Group General Manager and Chief Executive Officer, HSBC Global Private Banking, and Rona Fairhead, Independent non-executive Director, HSBC; [Edward Troup, Second Permanent Secretary and Tax Assurance Commissioner, HM Revenue and Customs: not called at this meeting].
4th June, 2015 (Guardian newspaper)
“HSBC has been ordered to pay a record 40m Swiss francs (£28m) and been given a final warning by the Geneva authorities for ‘organisational deficiencies’ which allowed money laundering to take place in the bank’s Swiss subsidiary.
The settlement means the Swiss will not prosecute HSBC or publish the findings of their investigation into alleged aggravated money laundering. But Geneva’s chief prosecutor, Olivier Jornot, cautioned that the bank was on notice, saying: ‘This is an excuse which will only apply once’.
Announcing the biggest financial penalty ever imposed by the Geneva authorities, Jornot launched a stinging attack on his own country’s financial laws, adding his voice to a growing a number of Swiss politicians and campaigners calling for reform of the country’s secretive banking system” (The Guardian, 4th June, 2015).
15th February, 2016 (Quotations from BBC website)
Having threatened for some time to take its headquarters out of London to an unspecified overseas destination because of the threats from over-regulation and an uncompetitive environment in London, Douglas Flint, HSBC Chairman announced that “The UK is one of the most globally connected economies in the world with a fantastic regulatory system and legal system and immense experience in dealing with international affairs …. …. The government’s made very clear its commitment to ensuring that that UK remains a leading international financial centre … We’ve ended up with the best of both worlds – a pivot to Asia led from London”. The Chairman added, “it was important that there was a change in the scope of the levy”. When apparently questioned on any discussion with government over the Bank Levy he said: “We had no negotiation with the government. The government was well aware of our view, and indeed the view of many other people who commented upon it, but there certainly was no pressure put, or negotiation”. He did endorse the view that London had an “internationally respected regulatory framework and legal system”. (http://www.bbc.co.uk/news/business-35575793)
11the July, 2016 (US Republican Report)
“Senior Department of Justice (DOJ) leadership, including Attorney General Holder, overruled an internal recommendation by DOJ’s Asset Forfeiture and Money Laundering Section to prosecute HSBC because of DOJ leadership’s concern that prosecuting the bank would have serious adverse consequences on the financial system.
The involvement of the United Kingdom’s Financial Services Authority in the U.S. government’s investigations and enforcement actions relating to HSBC, a British-domiciled institution, appears to have hampered the U.S. government’s investigations and influenced DOJ’s decision not to prosecute HSBC”. (‘Too Big to Jail’: Report prepared by the Republican Staff of the Committee on Financial Services, US House of Representatives, 114th Congress 11the July, 2016 – p.1)
The evidence offered for this influence is contained in the Report. George Osborne sent a letter to Ben Bernanke, Chairman of the US Federal Reserve on 10th September, 2012, referred to at the beginning of this timeline (the letter is reproduced in the US Republican Congress Report, Appendix 4, pp.43-5). The letter was followed up with a meeting to discuss its contents (9th October, 2012) between Osborne and Bernanke, on which a Briefing Memorandum was prepared for US Treasury Secretary Geithner, also contained in the Report. In this briefing it was stated that it was argued on the British side that recent “tougher enforcement measures” by the US against British-based banks raised “unwanted questions about potential U.S. hostility to London as a financial center. While acknowledging the importance of regulatory enforcement, Osborne sought Bernanke’s assistance to ensure that future actions involving British banks would be conveyed in advance and be fair” (US Republican Congress Report, Appendix 22, pp.173-181; quotations, p.174).
13th July, 2016 (Downing Street)
“When we take the big calls, we’ll think not of the powerful, but you. When we pass new laws, we’ll listen not to the mighty but to you. When it comes to taxes, we’ll prioritise not the wealthy, but you. When it comes to opportunity, we won’t entrench the advantages of the fortunate few. We will do everything we can to help anybody, whatever your background, to go as far as your talents will take you.” (Theresa May)
20th July, 2016 (Bloomberg and ft.com)
Bloomberg: “Federal agents surprised an HSBC Holdings Plc executive as he prepared to fly out of New York’s Kennedy airport around 7:30 p.m. Tuesday, arresting him for an alleged front-running scheme involving a $3.5 billion currency transaction in 2011.
Mark Johnson, HSBC’s global head of foreign exchange cash trading in London, was held in a Brooklyn jail overnight and will appear in court Wednesday, according to prosecutors. The U.S. unsealed a complaint against him and Stuart Scott, the bank’s former head of currency trading in Europe, making them the first individuals to be charged in the long-running probe.
The arrest and charges are a coup for the Justice Department, which has struggled to build cases against individuals in its investigation into foreign-exchange trading at global banks. U.S. prosecutors once had so much confidence in the quality of evidence they were gathering thanks to undercover cooperators that in September 2014, then-Attorney General Eric Holder said he expected charges against individuals within months. The U.K. Serious Fraud Office also found it difficult to make cases against currency traders and announced in March that it was dropping its efforts.” (http://www.bloomberg.com/news/articles/2016-07-20/hsbc-official-said-to-be-charged-by-u-s-in-fx-rigging-probe)
ft.com on the same story: “The US Department of Justice has already been criticised for failing to prosecute HSBC after it paid $2bn in 2012 over laundering billions of dollars for Mexican and Colombian drug gangs.” (ft.com)