This Week in Compliance: HSBC reaches settlement with DOJ

Miriam Konradsen Ayed

Here’s what’s been going on in the compliance world this week:


  • HSBC reaches settlement with DOJ: HSBC entered into a three-year deferred prosecution agreement with the DOJ and has agreed to pay a criminal fine of USD 63.1 million and USD 38.4 million in disgorgement and restitution, bringing the settlement to a total of USD 101.5 million. The agreement follows a DOJ investigation into rigged currency transactions harming two of the bank’s institutional clients, including Cairn Energy, which was hired by HSBC in 2011 to trade about USD 3.5 billion in proceeds from the sale of an Indian subsidiary into pounds. Two HSBC currency traders bought British pounds before they executed the Cairn transaction, driving up Cairn’s cost while making a trading profit for the bank. HSBC made USD 46 million from the illegal trades. According to the DOJ’s Acting Assistant Attorney General John Cronan, the bank had “misused confidential client information for its own profit”.
  • Six PCAOB accountants charged for disclosing confidential information to KPMG: Six accountants, including three former officials at PCAOB and three former partners at KPMG, were charged by the DOJ and SEC with misappropriating and using confidential information about the PCAOB’s planned inspections of KPMG in the period between 2015 and February 2017. According to the criminal indictment KPMG partners recruited officials at the PCAOB – a non-profit corporation that oversees the audits of public companies – who had illegally disclosed information about PCAOB’s plans to inspect KPMG audits, in turn, “enabling the former KPMG partners to analyze and revise audit work papers in an effort to avoid negative findings by the PCAOB.” Two of the former PCAOB officials had quit their jobs to work at KPMG, while the third official allegedly leaked PCAOB data while applying for a job with KPMG.


  • Brazil’s courts uphold Lula’s corruption conviction: Former president Lula da Silva’s conviction on corruption and money laundering charges was upheld by a Brazilian appeals court this Wednesday (24 January), which also further increased the original penalty from nine and a half years’ prison to 12 years and a month. Lula was found guilty of receiving a seaside duplex apartment worth approximately USD 755,000 as a gift from the construction company OAS as part of a USD multibillion bribe scheme controlled by the former president of Petrobras. The ruling could effectively debar Lula from running for a third term as Brazil’s president. A possibility that has triggered protestors to take to the streets of Brazil. Lula has so far led early polls for October’s presidential election. Lula claims he is innocent and accuses the prosecution is politically motivated and is aimed at preventing him from running for re-election. Yet, Lula still has several appeal options. According to his party, Lula will still register his candidacy by August as a final decision by electoral courts is unlikely before mid-September.
  • Bulgaria’s ruling party survives no-confidence vote: The center-right coalition cabinet led by Bulgarian Prime Minister Boyko Borissov survived a parliamentary no-confidence vote over a perceived lack of progress in curbing corruption in the country. The no-confidence vote was favoured by 103 deputies, yet opposed by 131 votes in the 240-seat parliament. The opposition Socialists, who had brought the no-confidence vote, allege that the government has done nothing to crack down on high level corruption since taking office last May and criticized it for passing anti-graft legislation which they believe would not yield the needed results. Observers noted that Borissov’s government is likely to withstand pressures, yet will face some challenging months ahead. Bulgaria currently ranks as the most corrupt European Union member country.
  • Two new sentences in Vietnam’s anti-corruption campaign: Amid a government crackdown on corruption, fraud and mismanagement, a Vietnamese court sentenced Trinh Xuan Thanh, a high-profile official from state oil and gas group PetroVietnam to life imprisonment for embezzlement and violation of state rules and handed down another 13-year prison sentence to Dinh La Thang, a former politburo official and senior Vietnamese politician, for violating state rules. In all, 22 people connected to PetroVietnam were tried in court, with more corruption trials to be expected during the year. The PetroVietnam corruption trial is connected to the banking sector through a deal in which the firm lost USD 35 million in an investment in Ocean Bank. The lender’s former chief executive, who was also a previous PetroVietnam chairman, was sentenced to death.


  • Saudi anti-corruption campaign nears its ends: The anti-corruption campaign launched by the Saudi Crown Prince has reached an end as announced by a Saudi public prosecution official. Yet questions still remain open about the future of the corruption crackdown, the status of the Prince Alwaleed bin Talal, and the unknown fate of 165 out of the 350 suspects detained last November. The announcement of the campaign closure was rather perceived as an attempt to calm investors looking for stability and transparency. According to government statements, the country’s corruption issues were rather limited to the people arrested during the campaign, yet, allegations suggest that new waves of arrests will emerge as the crown prince seeks increased centralization of his powers. Settlements achieved so far with the people detained in the crackdown have made the Saudi government USD 100 billion in recovered cash and assets; a sum the government will employ to support the country’s struggling economy.