Sunday, February 22, 2015


As a compliance officer, make it a habit to read transcripts and documents; you may find something hidden in the text that will alert you to an emerging threat. The United States Senate, in connection with its review of the nomination of United States Attorney Loretta Lynch to be Attorney General, submitted a number of written questions for the record*; the answers were submitted to the Senate on February 18, 2015.

Senator Grassley, the Committee Chairman, asked about the consequences or accountability regarding HSBC staff members or officers who allowed $881m in drug trafficking proceeds to be laundered through the bank. She neither fined nor charged anyone at HSBC with a crime. In her answer, US Atty. Lynch wrote, and I quote:

Virtually all of the senior executives who oversaw HSBCs flawed compliance program were replaced. Furthermore, HSBC 'clawed back' bonuses for senior executives who oversaw the anti-money laundering program. Answer to Question No. 2.

I read this as an admission that certain HSBC compliance supervisory staff member were terminated, or more likely, asked to resign. Being experienced in the compliance field, where there is a shortage of experienced compliance officers, they most certainly have found employment since leaving HSBC.

I must assume that they obtained their new positions in no small part due to glowing references from someone at HSBC Human Resources, who was anxious to place the bank's bad apples, and who also did not want to expose the bank to litigation from any ex-employee who might later claim that bad references, which were untruthful, caused them to become unemployable in the financial industry.

Therefore, these individuals, or at least some of them, are at work in new positions. Unfortunately, USA Lynch has stated that she cannot disclose their identities, because they were acquired during Grand Jury proceedings**, which operate under secrecy rules, so you will have to make your own checks. Have you hired anyone whose last place of employment was at HSBC ? If so, you had better take this matter to your outside bank counsel, so that your law firm conducts an intense investigation of this individual. Was he or she part of the systemic failure of HSBC to detect drug money laundering ? Guilty of willful blindness, perhaps ? You must rule them out as a participant, before you can retain them as an employee at your bank or NBFI.

What will you do if some other US Attorney charges them with a crime, before the Statute of Limitations runs out, when they are on the job at your bank ? Imagine the embarrassment and reputation damage to your bank if that happens. Check with your HR department forthwith, to insure that you do not have one of HSBCs bad apples on your compliance staff.
** Answer to Question No. 1.

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