HSBC Holdings plc OFAC Settlement: $375M (2012)

The settlement covers two sets of apparent violations. The primary set, all determined egregious, involves wire transfers processed by HSBC Group across five sanctions programs. HSBC Group processed 40 wire transfers totaling approximately $18,817,452 between March 18, 2004, and December 7, 2007, involving Cuba in apparent violation of the CACR. HSBC Group processed 1,031 wire transfers totaling approximately $136,736,510 between March 15, 2004, and May 31, 2006, in apparent violation of the BSR. HSBC Group processed 1,036 wire transfers totaling approximately $109,042,996 between March 15, 2004, and August 21, 2007, in apparent violation of the SSR. HSBC Group processed 25 wire transfers totaling approximately $1,172,363 between March 15, 2004, and April 27, 2004, involving the Government of Libya or Libyan persons in apparent violation of the now-repealed LSR. HSBC Group processed 203 funds transfers totaling approximately $164,308,904 between March 19, 2004, and June 15, 2010, in apparent violation of the ITR.

This settlement also covers separate and unrelated apparent violations that OFAC determined were not egregious. Between May 24, 2006, and October 10, 2008, HSBC Bank USA, N.A. failed to appropriately block or reject a book entry transfer of 32,000 ounces of gold bullion for the ultimate benefit of a bank owned or controlled by the Government of Iran, and processed nine electronic funds transfers totaling $21,786,029, in apparent violation of the BSR, ITR, SSR, and Executive Order 13469 of July 25, 2008, "Blocking Property of Additional Persons Undermining Democratic Processes or Institutions in Zimbabwe."

HSBC Group did not voluntarily self-disclose these apparent violations. OFAC determined all violations in the primary set were egregious. The total base penalty amount under the Guidelines for this set of apparent violations equals the statutory maximum penalty, which in this case is $1,159,872,734. The individual base penalties by program were: CACR — $2,600,000; BSR — $416,346,763; SSR — $378,554,375; LSR — $6,997,304; ITR — $355,374,292.

For the separate, non-egregious set of apparent violations, the statutory maximum penalty was $45,470,000 and the total base penalty amount under the Guidelines was $467,000.

Mitigation was extended because some of the apparent violations processed by HSBC Group may have been eligible for an OFAC license; HSBC Group had not received a penalty notice, finding of violation, cautionary letter, warning letter, or other administrative action from OFAC in the five years preceding the date of the transactions giving rise to the apparent violations; HSBC Group provided substantial cooperation to OFAC; HSBC Group took remedial action in response to matters described above; and this settlement is part of a comprehensive sanctions-related settlement with other federal, state, or local agencies. Mitigation was further extended because HSBC Holdings agreed to settle these apparent violations.

HSBC Holdings agreed to settle for $375,000,000, with the obligation deemed satisfied by a payment of $375,000,000 to the Department of Justice and the New York County District Attorney's Office.

HSBC Holdings' settlement with OFAC is part of a global sanctions-related settlement among HSBC Holdings, OFAC, the U.S. Department of Justice, the New York County District Attorney's Office, and the Federal Reserve Board of Governors. HSBC Holdings' OFAC settlement obligation was deemed satisfied by a payment of $375,000,000 to the Department of Justice and the New York County District Attorney's Office.

In reaching its determination that the above-referenced apparent violations were egregious, OFAC found that HSBC Group failed to exercise a minimal degree of caution or care in avoiding conduct that led to the apparent violations; several HSBC Group employees, including senior management, were aware of the conduct that led to the apparent violations; the apparent violations resulted in significant harm to U.S. sanctions programs objectives; HSBC Group is a highly sophisticated global financial organization; and HSBC Group did not maintain adequate policies or procedures to ensure compliance with the sanctions programs administered by OFAC.

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