HSBC said Monday that U.S. authorities were preparing to dismiss criminal charges against the bank, five years after it reached an agreement to avoid prosecution related to lapses in its money-laundering controls.
In 2012, the bank, one of the world’s biggest lenders, paid $1.9 billion and entered into a deferred prosecution agreement as part of a settlement with state and federal authorities. The deal — which came four years after the 2008 collapse of Lehman Bros. nearly brought down the financial system — was criticized at the time, raising concerns about whether some banks had grown too big to face criminal indictment.
The Justice Department had accused HSBC of not implementing proper systems to catch money laundering, allowing at least $881 million in proceeds from the sale of illegal drugs to flow through the U.S. financial system.
Prosecutors also said at the time that the bank had enabled the transfer of hundreds of millions of dollars to countries facing U.S. sanctions, including Cuba and Iran.
The deferred prosecution agreement was set to expire Monday if HSBC stayed out of trouble. The bank, which is based in Britain but generates more than half of its profit in Asia, said that the Justice Department was expected to file a motion to dismiss the case in federal court in New York City after the agreement concluded.
"HSBC is able to combat financial crime much more effectively today as the result of the significant reforms we have implemented over the last five years," Stuart Gulliver, the HSBC chief executive, said in a news release.
"We are committed to doing our part to protect the integrity of the global financial system, and further improvements to our own capability and contributions toward the partnerships we have established with governments in this area will remain a top priority for the bank into 2018 and beyond," he added.
No such filings related to HSBC had been made by late morning in New York. The Justice Department’s press office in Washington did not have an immediate comment, while the U.S. Attorney’s Office for the Eastern District declined to comment.
As part of the agreement, the bank bolstered its financial crime controls and added staff members in a broad reshaping of its compliance structure.
An outside corporate monitor was appointed in 2013 as part of the agreement and was expected to continue to examine the effectiveness of the bank’s anti-money laundering and sanctions compliance systems.
In its annual report this year, HSBC said that the monitor concluded that the bank continued to make progress in enhancing its compliance controls, but expressed "significant concerns about the pace of that progress" and "instances of potential financial crime" that were being reviewed by the Justice Department and the bank.
In its most recent quarterly update in September, the Justice Department said that it "believes that HSBC continues to show a commitment to compliance" with the agreement and "is aware of no issues that require the court’s intervention at this time."
The deferred prosecution agreement was criticized by some observers when it was announced. A federal judge overseeing the case noted the controversy when he approved the pact in 2013, but said at the time that he had no power to force the Justice Department to pursue a criminal case.
U.S. prosecutors have required guilty pleas by banks in a number of settlements since then.
In 2014, Credit Suisse became the first bank of its size and significance to plead guilty to criminal wrongdoing in more than two decades. It pleaded guilty to conspiring to aid tax evasion and paid about $2.6 billion in penalties.
That same year, French bank BNP Paribas agreed to plead guilty to criminal charges and pay an $8.9 billion penalty after it was accused of transferring billions of dollars on behalf of Sudan and other countries blacklisted by the United States.