HSBC Bank, one of the largest multinational financial institutions in the world, has reportedly reached an agreement with the U.S. government over alleged connections between that bank's foreign exchange subsidiary and a Middle Eastern firm that has a history of supporting Muslim extremist groups between 2003 and 2009.
The U.S. Department of Justice awarded HSBC a litigation deferral earlier this week, after slapping it with a $1.3 billion settlement charge and forcing it to accept greater oversight for a five-year period. Yet the initial charges – that the company allegedly engaged in money laundering operations for terrorist groups and Mexican drug cartels prior to 2009 – were replaced with minor infractions. These include the failure to institute a "anti-money laundering program" and "conduct appropriate due diligence."
The Justice Department, which is responsible for enforcing the nation's economic laws, admitted in a press release that nearly $800 million in drug-related proceeds had passed through the U.S. financial system virtually undetected. Additionally, it failed to enforce accountability standards at companies that do business in the United States, including HSBC's American subsidiary, HSBC USA.
Most notably, however, is the concession from U.S. officials that the primary reason that HSBC was not fully prosecuted was that because it is a systemically important institution. In simpler terms, it's too big to fail.
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