NEW YORK – The decision by attorney-general nominee Loretta Lynch, as U.S. attorney, not to prosecute HSBC for money-laundering for terrorists and drug cartels is relevant to the ongoing nuclear negotiations with Iran as sanctions against the Islamic regime remain a key issue.
Thousands of instances in which HSBC violated U.S. law prohibiting transactions with Iran were documented in a July 17, 2012, staff report by the U.S. Senate Permanent Subcommittee on Investigations titled “U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case Study.”
However, Lynch, whose confirmation vote has been delayed by the Senate amid concern over her handling of HSBC and over other issues, signed a “deferred prosecution agreement” just five months after the report was issued in which the bank paid a $1.9 billion fine in return for the U.S. Department of Justice agreeing not to bring criminal charges.
According to the 2012 Senate report, some of the transactions were made with Iran’s largest banks with the aim of circumventing sanctions the U.S. had imposed to curb Tehran’s nuclear ambitions.
“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 [HSBC Bank USA] involving $19.7 billion,” the Senate subcommittee report detailed.
Of the 28,000 transactions, nearly 25,000 involved Iran, while 3,000 involved other prohibited countries or persons.
The review characterized nearly 2,600 of the transactions, including 79 involving Iran, as “Transactions of Interest” requiring additional analysis to determine whether violations of U.S. law occurred.
As WND reported, Lynch’s confirmation vote in the Senate initially was postponed after Sen. David Vitter, R-La., a member of the Senate Judiciary Committee, opened an investigation of Lynch’s role in the decision not to criminally prosecute HSBC. Vitter launched the probe after his staff quizzed a former HSBC employee, John Cruz, whose trove of original evidence of money laundering was reported first by WND.
Since then, Vitter’s office has continued pressing GOP senators quietly behind the scenes to vote against Lynch’s confirmation. A vote of the full Senate could be held later this month.
The Department of Justice statement Dec. 11, 2012, announcing the deferred prosecution settlement said that among its various illegal money-laundering activities, HSBC had violated the Bank Secrecy Act, the International Emergency Economic Powers Act, and the Trading with the Enemy Act by illegally conducting transactions on behalf of customers of Iran along with Cuba, Libya, Sudan and Burma.
The Senate subcommittee’s 2012 report also detailed how HSBC may have aided terrorists through the suspect transactions involving Iran.
“While the aim in many of those cases may have been to avoid the delays associated with the OFAC [U.S. Treasury Department’s Office of Foreign Assets Control] 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,” the Senate Subcommittee report continued.
“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,” the report continued.
Lynch aware of whistleblower’s evidence
As WND reported March 26 Lynch admitted to the Senate Judiciary Committee that her investigators in the probe of HSBC were aware of evidence compiled by Cruz, but she chose, nevertheless, not to bring criminal charges.
Lynch provided written answers to questions submitted by committee chairman Sen. Charles Grassley, R-Iowa, in a document posted on the panel’s website dated Feb. 18.
In response to Grassley, Lynch, as U.S. attorney for the Eastern District of New York, acknowledged Department of Justice “investigators did speak with and receive documents and information from Mr. Cruz.”
“Based on the information he provided, we took appropriate additional investigative steps, including requiring additional information from HSBC,” she replied to the senator.
“Investigators carefully considered the information he provided as we considered whether there was sufficient admissible evidence to prosecute violations at HSBC and whether any such prosecution otherwise would have been consistent with the principles of federal prosecution contained in the United States Attorney’s Manual,” said Lynch.
“Ultimately, HSBC entered into a DPA that required remarkable reforms based on Bank Secrecy Act and sanctions violations, and that explicitly provides no protection from prosecution for conduct outside of the Statement of Facts,” she said.
Grassley noted Cruz spoke with IRS criminal investigators in Colorado in early 2012 and provided approximately 1,000 pages of documents and 30 hours of audio recordings to the IRS and the Securities and Exchange Commission in whistleblower submissions in July 2012.
The Iowa senator also pointed out that Cruz provided the material to the Department of Justice in September 2012, more than two months before Lynch’s office filed the deferred prosecution agreement.
Grassley asserted the Cruz documents “suggest the extent of HSBC’s criminal conduct may not have been fully described in the Statement of Facts associated with the [deferred prosecution agreement] reached with the government.”