Friday, April 3, 2015


Many AML analysts have commented, of late, on the most recent quarterly status report, filed by the court-appointed Monitor, Michael Cherkasky, reviewing the implementation of the HSBC Deferred Prosecution Agreement. Unfortunately, they have chosen to interpret the Monitor's findings, rather than give the reader an opportunity to review the details the findings for themselves. In my opinion, those findings explore the depth of the problems, and the corporate culture responsible for them, and the reader cannot fully comprehend them without access to the actual facts relayed by the Monitor.*

While we cannot post the entire six-page letter from the US Attorney, to the Court, detailing the Monitor's findings, we believe it appropriate to quote directly, so that the reader can grasp the magnitude of the problem. The original document was filed in United States vs. HSBC Bank USA, NA et al, Case No.: 12-cr-00763 (EDNY), on April 1, 2015, and a full review of the text is recommended. Here are some of the highlights:

"In the monitor's view, two of the greatest impediments to HSBC Group's implementation of a sustainable compliance program are its corporate culture and its compliance technology."

"... during the United States country review, the Monitor found that senior managers of HSBC Bank ISA's Global Banking and Markets (GBM) business line inappropriately pushed back against adverse findings by the HSBC Global Internal Audit team, and HSBC's Compliance Testing and Control (CTAC) ...  the Monitor found that the GMB senior managers resisted the review ... and similarly delayed, and interfered with the work of the CTAC team. GBMs interactions were marked by combativeness, overblown complaints about factual inaccuracy, and a basic lack of cooperativeness."

Senior management actually had to make staff changes, and to warn employees that "rudeness, cynicism, or any attempt to intimidate, are not acceptable, and will not be tolerated."

The Monitor also found "material weaknesses" in HSBCs compliance technology, "in which a great deal of work has to be done."

Clearly, a more accurate picture of the HSBC compliance problem is better seen from the actual quotes of the Monitor, rather than a short summary of the situation by commentators, mitigated by PR quotes from HSBC PR specialists, asserting that the problems are being solved forthwith. That is not a true appraisal of the process; it is far more serious than some would have us think.
* e.g. " ... In certain instances, the Monitor believes that HSBC Group's progress has been to slow."

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