The FRB and the OCC each issued an enforcement order (the “Orders”) after finding internal control deficiencies in the Bank Secretary Act/anti-money laundering (“BSA/AML”) compliance programs of the U.S. subsidiaries of HSBC Holdings plc, including HSBC North American Holdings, Inc. (“HNAH”), and HSBC Bank USA, N.A. (“HSBC Bank”). The OCC’s order, a consent order, identified various BSA/AML compliance deficiencies by HSBC Bank, including failure to develop internal controls for customer due diligence, procedures for monitoring and reporting suspicious activity and independent testing for BSA/AML compliance. The OCC also noted other deficiencies, including inadequate risk-based monitoring procedures for wire transfers, failure to monitor banknote or “bulk cash” transactions from mid-2006 to mid-2009, failure to collect or maintain adequate customer due diligence records for certain of its operations, inability to fully and timely comply with suspicious activity reporting obligations, and failure to appropriately designate certain customers as high-risk, including politically-exposed persons. The OCC primarily attributed these deficiencies to insufficient manpower and lack of adequate, formalized procedures.
To remedy these BSA/AML deficiencies, HNAH and HSBC Bank agreed with the FRB and the OCC, among other things, to prepare and submit an action plan for improving their BSA/AML compliance programs; recruit and hire a qualified regional compliance officer and BSA officer; engage an independent consultant to conduct an independent review of their BSA/AML compliance programs, implement appropriate procedures for performing customer due diligence and enhanced due diligence when opening, renewing or modifying accounts; improve wire transfer monitoring and suspicious activity reporting; provide BSA/AML training to appropriate personnel; develop and maintain an effective program to audit their BSA/AML programs; and ensure that their BSA/AML compliance programs satisfy certain benchmarks within 90 days of the Orders’ issuance.