PrefBlog

The US has shaken down HSBC & Standard Chartered:

HSBC (HSBA) Holdings Plc will pay at least $1.9 billion in a deferred prosecution agreement that settles U.S. probes of money laundering tied to Europe’s largest bank, a person familiar with the matter said, making it the largest such accord ever.
…
Yesterday, Standard Chartered Plc (STAN), Britain’s second-largest bank by market value, agreed to pay $327 million in fines after regulators alleged it violated U.S. sanctions with Iran.

As far as I can tell from the Senate REPORT: U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History, the problem was that they did not create enough paper:

An outside auditor hired by HBUS has so far identified, from 2001 to 2007, more than 28,000 undisclosed, OFAC sensitive transactions that were sent through HBUS involving $19.7 billion. Of those 28,000 transactions, nearly 25,000 involved Iran, while 3,000 involved other prohibited countries or persons. The review has characterized nearly 2,600 of those transactions, including 79 involving Iran, and with total assets of more than $367 million, as “Transactions of Interest” requiring additional analysis to determine whether violations of U.S. law occurred. While the aim in many of those cases may have been to avoid the delays associated with the OFAC filter and individualized reviews, rather than to facilitate prohibited transactions, actions taken by HSBC affiliates to circumvent OFAC safeguards may have facilitated transactions on behalf of terrorists, drug traffickers, or other wrongdoers. While HBUS insisted, when asked, that HSBC affiliates provide fully transparent transaction information, when it obtained evidence that some affiliates were acting to circumvent the OFAC filter, HBUS failed to take decisive action to confront those affiliates and put an end to the conduct. HBUS’ experience demonstrates the strong measures that the U.S. affiliate of a global bank must take to prevent affiliates from circumventing OFAC prohibitions.

It was a directionless day for the Canadian preferred share market, with PerpetualPremiums up 4bp while FixedResets and DeemedRetractibles both gained 1bp. Volatility was low. Volume was average.

This entry was posted on Tuesday, December 11th, 2012 at 12:01 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.