Law.com Subscribers SAVE 30%
Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.
Business Crimes Hotline
HSBC Resolves Wire Fraud Charges
On Jan. 18, 2018 HSBC Holdings plc (HSBC) entered into a deferred prosecution agreement (DPA) and agreed to pay $101.5 million in criminal penalties and disgorgement to resolve two counts of wire fraud under 18 U.S.C. §1343.
In 2010 and 2011, HSBC was hired by two clients to execute multi-billion dollar foreign exchange transactions. After completing confidentiality agreements for the planned transactions, HSBC's former Head of Foreign Exchange, Mark Johnson, and his team first purchased British Pound Sterling (GBP) for HSBC proprietary accounts. The “front-running” scheme sought to use the future client transactions to drive the price of GBP in a direction that would benefit the bank's account. HSBC traders then executed the clients' transactions, the second of which was for the exchange of $3.5 billion. Johnson and his team structured the clients' trades to maximize the price increase of GBP, which ultimately benefitted Johnson and his co-conspirators at the expense of the client.
Further, HSBC made misrepresentations to Carin Energy, the victim of the 2011 trade, to conceal the nature of their transactions. HSBC later admitted to the Department of Justice (DOJ) that they made approximately $38.4 million from the first transaction in March 2010, and approximately $8 million from the transaction in December 2011. The bank settled with Carin for approximately $8 million, which the DOJ credited as full restitution.
Mr. Johnson was charged and convicted of one count of conspiracy to commit wire fraud and eight counts of wire fraud for his role in the transactions. HSBC entered into a three-year DPA and agreed to pay $38.4 million in disgorgement and a $63.1 million criminal penalty. The DOJ gave HSBC substantial cooperation credit for their assistance in the investigation. The DOJ also considered the bank's remedial measures, including the dedication of significant resources to improving the bank's systems and controls, in addition to the termination of employees involved in the wrongdoing. The bank also committed to continuing to enhance its compliance program and internal controls. HSBC recently completed its December 2012 DPA with the DOJ relating to its $1.9 billion fine for helping launder drug money from Mexico, during which HSBC worked to strengthen its anti-money laundering and sanctions compliance capabilities.
Likewise, in September 2017, the US Federal Reserve (“Fed”) also fined HSBC $175 million for “unsafe and unsound practices” in its foreign exchange trading business. The Fed claimed that HSBC failed to monitor chat rooms where traders swapped information regarding investment positions, and imposed a fine for oversight and control deficiencies over foreign exchange traders. In 2014, the bank paid US, UK, and Swiss regulators $618 million for its involvement in rigging foreign exchange rates. HSBC, along with five other banks, shared information about their firm's activities and colluded to manipulate exchange rates. Additionally, a UK based currency firm, ECU, commenced an investigation into its own past foreign exchange trades with HSBC. ECU claims that it complained to HSBC at the time of the trades and that HSBC exonerated itself from any wrong doing. In light of the recent news, ECU has asked London's commercial court that HSBC turn over records relating to the three large orders it placed in 2006.
– Colleen Snow, Mayer Brown
This premium content is locked for Entertainment Law & Finance subscribers only
ENJOY UNLIMITED ACCESS TO THE SINGLE SOURCE OF OBJECTIVE LEGAL ANALYSIS, PRACTICAL INSIGHTS, AND NEWS IN ENTERTAINMENT LAW.
- Stay current on the latest information, rulings, regulations, and trends
- Includes practical, must-have information on copyrights, royalties, AI, and more
- Tap into expert guidance from top entertainment lawyers and experts
Already a have an account? Sign In Now Log In Now
For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473
How Secure Is the AI System Your Law Firm Is Using?
In a profession where confidentiality is paramount, failing to address AI security concerns could have disastrous consequences. It is vital that law firms and those in related industries ask the right questions about AI security to protect their clients and their reputation.
COVID-19 and Lease Negotiations: Early Termination Provisions
During the COVID-19 pandemic, some tenants were able to negotiate termination agreements with their landlords. But even though a landlord may agree to terminate a lease to regain control of a defaulting tenant's space without costly and lengthy litigation, typically a defaulting tenant that otherwise has no contractual right to terminate its lease will be in a much weaker bargaining position with respect to the conditions for termination.
Pleading Importation: ITC Decisions Highlight Need for Adequate Evidentiary Support
The International Trade Commission is empowered to block the importation into the United States of products that infringe U.S. intellectual property rights, In the past, the ITC generally instituted investigations without questioning the importation allegations in the complaint, however in several recent cases, the ITC declined to institute an investigation as to certain proposed respondents due to inadequate pleading of importation.
The Power of Your Inner Circle: Turning Friends and Social Contacts Into Business Allies
Practical strategies to explore doing business with friends and social contacts in a way that respects relationships and maximizes opportunities.
Authentic Communications Today Increase Success for Value-Driven Clients
As the relationship between in-house and outside counsel continues to evolve, lawyers must continue to foster a client-first mindset, offer business-focused solutions, and embrace technology that helps deliver work faster and more efficiently.