HSBC 2012 Annual Report Download - page 513

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Overview Operating & Financial Review Corporate Governance Financial Statements Shareholder Information
it recommends, and will produce regular assessments of the effectiveness of HSBC’s compliance function. If HSBC
fulfils all of the requirements imposed by the US DPA and other agreements, the DOJ’s charges against it will be
dismissed at the end of the five-year period. The US DPA remains subject to certain proceedings before the United
States District Court for the Eastern District of New York. The DoJ or the New York County District Attorney’s
Office may prosecute HSBC in relation to the matters which are the subject of the US DPA if HSBC breaches the
terms of the US DPA.
Steps continue to be taken to address the requirements of the US DPA and the FSA undertaking to ensure
compliance, and that effective policies and procedures are maintained. In addition, the settlement with regulators does
not preclude private litigation relating to, among other things, HSBC’s compliance with applicable anti-money
laundering, BSA and sanctions laws.
In July 2012, HSBC Mexico paid a fine imposed by the Mexican National Banking and Securities Commission
amounting to 379m Mexican pesos (approximately US$28m), in connection with non-compliance with anti-money
laundering systems and controls.
US tax and broker-dealer investigations
HSBC continues to cooperate in ongoing investigations by the DoJ and the US Internal Revenue Service regarding
whether certain Group companies and employees acted appropriately in relation to certain customers who had US tax
reporting requirements. In connection with these investigations, HSBC Private Bank Suisse SA, with due regard for
Swiss law, has produced records and other documents to the DoJ and is cooperating with the investigation. Other
HSBC entities are also cooperating with the relevant US authorities, including with respect to US-based clients of
an HSBC Group company in India.
In April 2011, HSBC Bank USA received a summons from the US Internal Revenue Service directing HSBC Bank
USA to produce records with respect to US-based clients of an HSBC Group company in India. HSBC Bank USA
has cooperated fully by providing responsive documents in its possession in the US to the US Internal Revenue
Service.
Also in April 2011, HSBC Bank USA received a subpoena from the SEC directing HSBC Bank USA to produce
records in the US related to, among other things, HSBC Private Bank Suisse SA’s cross-border policies and
procedures and adherence to US broker-dealer and investment adviser rules and regulations when dealing with US
resident clients. HSBC Bank USA continues to cooperate with the SEC. HSBC Private Bank Suisse SA has also
produced records and other documents to the SEC and is cooperating with the SEC’s investigation.
Based on the facts currently known in respect of each of these investigations, there is a high degree of uncertainty as
to the terms on which the ongoing investigations will be resolved and the timing of such resolution, including the
amounts of any fines and/or penalties. As matters progress, it is possible that any fines and/or penalties could be
significant.
Investigations and reviews into the setting of London interbank offered rates, European interbank
offered rates and other benchmark interest and foreign exchange rates
Various regulators and competition and enforcement authorities around the world including in the UK, the US,
Canada, the EU, Switzerland and Asia, are conducting investigations and reviews related to certain past submissions
made by panel banks and the processes for making submissions in connection with the setting of London interbank
offered rates (‘Libor’), European interbank offered rates (‘Euribor’) and other benchmark interest and foreign
exchange rates. Several of these panel banks have reached settlements with various regulatory authorities. As certain
HSBC entities are members of such panels, HSBC and/or its subsidiaries have been the subject of regulatory
demands for information and are cooperating with those investigations and reviews. Based on the facts currently
known, there is a high degree of uncertainty as to the resolution of these regulatory investigations and reviews,
including the timing. The potential impact and size of any fines or penalties that could be imposed on HSBC cannot
be measured reliably.
In addition, HSBC and other panel banks have been named as defendants in private lawsuits filed in the US with
respect to the setting of Libor, including putative class action lawsuits which have been consolidated before the US
District Court for the Southern District of New York. The complaints in those actions assert claims against HSBC
and other panel banks under various US laws including US antitrust laws, the US Commodities Exchange Act, and