Saturday, September 3, 2016


For those who have been wondering what has been happening with the HSBC Holdings appeal of the District Judge's order, which  required the release of the independent Monitor's report on the status of improvements upon the anti-money laundering controls ordered in the Deferred Prosecution Agreement, the bank's dream team of attorneys may be dragging their legal heels. A mortgage client of the bank, Herbert Dean Moore Jr., had moved to unseal the report, prepared by the court-appointed Monitor, Michael Cherasky, to ascertain whether HSBC was continuing to engage in practices that were to be corrected, pursuant to the 2012 DPA.

HSBC's argument is that public disclosure of the Monitor's report, even in redacted form, will hinder the Monitor's ability to supervise HSBC. The United States position is the same, and it adds that bank employees will be less likely to cooperate with the Monitor, if they knew that their actions could be publicly released. Nowhere is either party giving any consideration to the financial community's right to know if HSBC has cleaned up its dysfunctional AML/CFT compliance program. The world's banks operate risk-based compliance programs, and they require accurate information, to function at satisfactory levels. They cannot deal with HSBC in confidence if they are in the dark on its compliance effectiveness.

I will let you be the judge of whether HSBC has engaged in conduct that has delayed the prompt resolution of the appeal. HSBC filed its Notice of Appeal on April 8, 2016; its brief was due on May 17, yet its counsel filed a motion to extend the time to file, and the Court granted a new deadline date of July 21, which was, coincidentally, the date that the brief of the United States, which also opposed public release of the report, was due.

The listed reason to justify the HSBC delay was  stated as " setting a common briefing schedule for all of the consolidate appeals will benefit all parties, and facilitate efficient and orderly consolidation for the Court." [Motion to Extend Time at 3]. The Court routinely granted the motion, and the HSBC brief was filed on the July 21 date.

This net result of this delay is that  Moore's brief is now not due until October 20, after which HSBC, and probably the United States, will reply. This matter will not be resolved in 2016, and you can expect the appellants to seek oral argument, which will further delay the ultimate release of the report.

The financial community, and the bank's existing and future clients, deserve to know whether the bank is making any real progress in creating an effective AML/CFT compliance program, which will truly reduce the risks of money laundering.  We need to know whether HSBCs bad old days are gone forever, and know whether the reforms have been implemented. If not, the report will most likely tell us. That is why its public release is critical.

Remember, reportedly HSBC evaded a major criminal prosecution, for its money laundering sins and transgressions, by the proverbial skin of its teeth.  Delaying the resolution of the appeal of the court's order, which released the report, does not assure us that the DOJ decision was the right one.

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