n 2010, acting on a tip from a whistleblower employed by HSBC Holdings plc ("HSBC Group"), the DOJ began an investigation of the UK-based bank for: 1) Failing to maintain an adequate anti-money laundering compliance program, and 2) Violating U.S. sanctions by conducting business with Iran and Sudan. HSBC Group fully cooperated-turning over all relevant documents and data and facilitating witness interviews with its employees. After completing its investigation, the DOJ issued the following press release on December 11, 2012: WASHINGTON- .. . [HSBC Group] -a United Kingdom corporation headquartered in London-and HSBC Bank USA N.A. (HSBC Bank USA) (together, HSBC)-a federally chartered banking corporation headquartered in Mclean, Va.-violated] the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). According to court documents, HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and to conduct appropriate due diligence on its foreign correspondent account holders. The HSBC Group violated IEEPA and TWEA by illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma-all countries that were subject to sanctions enforced by the Office of Foreign Assets Control (OFAC) at the time of the transactions. "HSBC is being held accountable for stunning failures of oversight-and worse-that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries, and to facilitate hundreds of millions more in transactions with sanctioned countries," said Assistant Attorney General Breuer. "The record of dysfunction that prevailed at HSBC for many years was astonishing. Today, HSBC is paying a heavy price for its conduct, and, under the terms of today's agreement, if the bank fails to comply with the agreement in any way, we reserve the right to fully prosecute it."The AML Investigation According to court documents, from 2006 to 2010, HSBC Bank USA severely understaffed its AML compliance function and failed to implement an anti-money laundering program capable of adequately monitoring suspicious transactions and activities from HSBC Group Affiliates, particularly HSBC Mexico, one of HSBC Bank USA's largest Mexican customers. This included a failure to monitor billions of dollars in purchases of physical U.S. dollars, or "banknotes," from these affiliates. Despite evidence of serious money laundering risks associated with doing business in Mexico, from at least 2006 to 2009, HSBC Bank USA rated Mexico as "standard" risk, its lowest AML risk category. As a result, HSBC Bank USA failed to monitor over $670 billion in wire transfers and over $9.4 billion in purchases of physical U.S. dollars from HSBC Mexico during this period, when HSBC Mexico's own lax AML controls caused it to be the preferred financial institution for drug cartels and money launderers. A significant portion of the laundered drug trafficking proceeds were involved in the Black Market Peso Exchange (BMPE), a complex money laundering system that is designed to move the proceeds from the sale of illegal drugs in the United States to drug cartels outside of the United States, often in Colombia. According to court documents, beginning in 2008, an investigation . . . identified multiple HSBC Mexico accounts associated with BMPE activity and revealed that drug traffickers were depositing hundreds of thousands of dollars in bulk U.S. currency each day into HSBC Mexico accounts. As a result of HSBC Bank USA's AML failures, at least $881 million in drug trafficking proceeds- including proceeds of drug trafficking by the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia-were laundered through HSBC Bank USA. HSBC Group admitted it did not inform HSBC Bank USA of significant AML deficiencies at HSBC Mexico, despite knowing of these problems and their effect on the potential flow of illicit funds through HSBC Bank USA. The Sanctions Investigation According to court documents, from the mid-1990s through September 2006, HSBC Group allowed approximately $660 million in OFAC-prohibited transactions to be processed through U.S. financial institutions, including HSBC Bank USA. HSBC Group followed instructions from sanctioned entities such as Iran, Cuba, Sudan, Libya, and Burma, to omit their names from U.S. dollar payment messages sent to HSBC Bank USA and other financial institutions located in the United States. The bank also removed information identifying the countries from U.S. dollar payment messages; deliberately used less-transparent payment messages, known as cover payments; and worked with at least one sanctioned entity to format payment messages, which prevented the bank's filters from blocking prohibited payments. Specifically, beginning in the 1990s, HSBC Group affiliates worked with sanctioned entities to insert cautionary notes in payment messages including "care sanctioned country," "do not mention our name in NY," or "do not mention Iran." HSBC Group became aware of this improper practice in 2000. In 2003, HSBC Group's head of compliance acknowledged that amending paymentmessages \"could provide the basis for an action against [HSBC] Group for breach of sanctions.\" Notwithstanding instructions from HSBC Group Compliance to terminate this practice, HSBC Group afliates were permitted to engage in the practice for an additional three years through the granting of dispensations to HSBC Group policy. Court documents show that as early as July 2001, HSBC Bank USA's chief compliance ofcer confronted HSBC Group's Head of Compliance on the issue of amending payments and was assured that \"Group Compliance would not support blatant attempts to avoid sanctions, or actions which would place [HSBC Bank USA] in a potentially compromising position.\" As early as July 2001, HSBC Bank USA told HSBC Group's head of compliance that it was concerned that the use of cover payments prevented HSBC Bank USA from conrming whether the underlying transactions met OFAC requirements. From 2001 through 2006, HSBC Bank USA repeatedly told senior compliance ofcers at HSBC Group that it would not be able to properly screen sanctioned entity payments if payments were being sent using the cover method. These protests were ignored. Manhattan District Attorney Cyrus R. Vance Jr., said, \"New York is a center of international nance, and those who use our banks as a vehicle for international crime will not be tolerated. My ofce has entered into Deferred Prosecution Agreements with two different banks in just the past two days, and with six banks over the past four years. Sanctions enforcement is of vital importance to our national security and the integrity of our nancial system. The ght against money laundering and terror nancing requires global cooperation, and our joint investigations in this and other related cases highlight the importance of coordination in the enforcement of US. sanctions. I thank our federal counterparts for their ongoing partnership.\" Queens County District Attorney Richard A. Brown said, \"No corporate entity should ever think itself too large to escape the consequences of assisting international drug cartels. In particular, banks have a special responsibility to use appropriate due diligence in monitoring the cash transactions owing through their nancial system and identifying the sources of that money in order not to assist in criminal activity. By allowing such illicit transactions to occur, HSBC failed in its global responsibility to us all. Hopefully, as a result of this historical settlement, we have gained the attention of not only HSBC but that of every other major nancial institution so that they cannot turn a blind eye to the crime of money laundering.\"1 In addition to fully cooperating with the DOJ's investigation, HSBC immediately undertook the following remedial measures: a. HSBC Group . . . [installed] a new leadership team, including a new CEO, Chairman, Chief Legal Ofcer, and Head of Global Standards Assurance. b. HSBC Group . . . simplified its control structure so that the entire organization [was] aligned around four global businesses, five regional geographies, and ten global functions. This allows HSBC Group to better manage its business and communication, and better understand and address risks worldwide. c. Since January 2011, HSBC Group [applied] a more consistent global risk appetite and, as a result, has sold 42 businesses and withdrawn from 9 countries. d. HSBC Group [undertook] to implement single global standards shaped by the highest or most effective anti- money laundering standards available in any location where the HSBC Group operates. This new policy will require that all HSBC Group Affiliates will, at a minimum, adhere to U.S. anti-money laundering standards. e. HSBC Group . .. elevated the Head of HSBC Group Compliance position to a Group General Manager, which is one of the 50 most senior employees at HSBC globally. HSBC Group has also replaced the individual serving as Head of HSBC Group Compliance. f. The Head of HSBC Group Compliance [was] given direct oversight over every compliance officer globally, so that both accountability and escalation now flow directly to and from HSBC Group Compliance. g. Eighteen of the top twenty-one most senior officers at HSBC Group [ were replaced] since the beginning of 2011. h. Material or systemic AML control weaknesses at any affiliate that [were] reported by the Regional and Global Business Compliance heads [and] shared with all other Regional and Global Business Compliance heads facilitating horizontal information sharing. i . The senior leadership team that attends HSBC Group Management Board meetings is collectively and individually responsible for reviewing all of the information presented at the meeting, as well as all written documentation provided in advance of the meeting, and determining whether it affects their respective entity or region. In addition, if an executive believes that something occurring within his or her area of responsibility affects another business or affiliate within HSBC Group, it is that executive's responsibility to seek out the executives from that business or affiliate and work to address the issue. j. HSBC Group . . . restructured its senior executive bonus system so that the extent to which the senior executive meets compliance standards and values has a significant impact on the amount of the senior executive's bonus, and failure to meet those compliance standards and values could result in the voiding of the senior executive's entire year-end bonus. k. HSBC Group . . . commenced a review of all [Know Your Customer ("KYC")] files across the entire Group. The first phase of this remediation will cost an estimated $700 million to complete over five years. 1. HSBC Group . . . defer[red] a portion of the bonus compensation for its most senior officers, namely its Group General Managers and Group Managing Directors, during the pendency of the deferred prosecution agreement, subject to EU and UK legal and regulatory requirements.m. HSBC Group . . . adopted a set of guidelines to be taken into account when considering whether HSBC Group should do business in countries posing a particularly high corruption/rule of law risk as well as limiting business in those countries that pose a high financial crime risk. n. Under HSBC Group's new global sanctions policy, HSBC Group will be utilizing key [government] sanctions lists to conduct screening in all jurisdictions, in all currencies