Compliance Blog

Written by Shari R. Pogach, Regulatory Paralegal

...and says he's a shrimp farmer.  So the HSBC branch, located in Sinaloa, a Mexican state known for much drug-related violence, opens a private wealth account for this 19-year old man with his bag of thousands of dollars in cash.  That's not all the court-appointed compliance monitor's crew of investigators discovered.  They visited a site in Mexico where HSBC loaned funds to finance the construction of a factory.  At the supposed factory site instead was a mansion with a staff of servants.  Apparently local bank staff had made a site visit and still signed off on the loan.

Basic Customer Identification Program (CIP) 101 know your customer, his or her expected activities and any money-laundering risks. And, your compliance departments should be asking basic questions, and flagging suspicious transactions and customers.  

According to The Wall Street Journal, sources familiar with the monitor's findings indicate that in spite of working to get the bank's compliance systems up to snuff, HSBC still struggles to meet the terms of its deferred prosecution agreement.  The bank's financial crime compliance costs in 2015 were $2.9 billion and its financial compliance staff is now up to 9,000.

HSBC Chief Legal Officer Stuart Levey has stated that with operations in 71 countries, the bank will continually face financial-crime risks but that it's a never-ending process and frankly we'll always find ways in which we're slightly falling short.  But HSBC is determined to meet the settlement terms and does not believe it will be prosecuted after 2017.

Stay tuned!

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NCUA Issues Legal Opinion Letter on Credit Union Custodian Services. On March 28, 2016, the NCUA Office of General Counsel issued a new legal opinion letter confirming the authority of federal credit unions to place member funds in deposit accounts at institutions insured by the FDIC and to serve as custodian for that FDIC-insured account. Under the Federal Credit Union Act, federal credit unions may generally deposit funds in national banks or FDIC-insured state chartered banks and may act as custodians for member funds as an incidental power. In addition to confirming this authority, the legal opinion letter sets forth six requirements federal credit unions must satisfy in order to offer this service to members. You can find the letter here.