* Departures come as bank tries to clean up compliance efforts
* Bank entered deferred prosecution agreement in December 2012
* HSBC has long experienced turnover in compliance staff
By Carrick Mollenkamp and Brett Wolf
Nov 4 (Reuters) - Two top legal officials at the U.S. arm of HBSC Holdings Plc are leaving their roles, a spokesman and sources said, in the midst of the bank’s efforts to clean itself up after a sweeping U.S. criminal probe into money-laundering lapses.
A Senate subcommittee report said in 2012 that high turnover has hurt HSBC’s years-long effort to bolster its compliance with anti-money-laundering laws in the United States.
But a senior HSBC compliance official said the bank is now making changes so that it can comprehensively assess compliance risk, a concern that became all the more acute after the bank signed a deferred prosecution agreement with the U.S. Department of Justice in 2012. The bank agreed to pay $1.9 billion as part of that deal.
“We have plans to bring on some of the best minds and best executives in the compliance industry,” said Robert Werner, global head of financial crime compliance. “Watch this space.”
Werner, a former Treasury Department official who specialized in money laundering and sanctions violations, joined HSBC last year.
Gary Peterson, chief compliance officer for HSBC’s U.S. operations, is leaving the bank, HSBC spokesman Robert Sherman said in a statement. Peterson, whose departure was first reported by the Wall Street Journal, was not available for comment.
Separately, Alan Schienberg, an executive vice president and a director of anti-money-laundering at HSBC, is stepping down and will take on an advisory role, said people familiar with the situation. Reached at his home, Schienberg declined comment.
Both Peterson and Schienberg were seen as components of the bank’s efforts to improve, the Senate Permanent Subcommittee on Investigations said in its July 2012 report on HSBC’s lapses in the United States. Those lapses spurred investigations by the Justice Department, U.S. Immigration and Customs Enforcement, and the Manhattan district attorney, which culminated in the December 2012 deferred-prosecution agreement.
The bank’s efforts to fix itself date back to at least April 2003, when the Federal Reserve Bank of New York and New York state bank regulators told HSBC to do a better job of policing suspicious money flows. The bank hired a tough federal prosecutor to head its anti-money-laundering unit, and installed systems to monitor its business.
But HSBC also suffered rapid turnover among its compliance staff in the ensuing years. Between 2005 and 2012, at least a half-dozen executives oversaw the bank’s anti-money-laundering division in the United States. Those changes made “reforms difficult to implement,” the report said.
In 2009, the U.S. Office of the Comptroller of the Currency, a bank regulator, deemed one executive incompetent. In one dramatic move, last year David Bagley, a top HSBC compliance official, told a U.S. Senate subcommittee he was stepping down.
The bank is in the initial stages of its review by an independent monitor, Michael Cherkasky, a former New York prosecutor and Kroll Inc chief executive, according to a document filed on Sept. 30 in federal court in New York. Some 60 experts in dirty-money probes are assisting Cherkasky, whose review was set to start on Oct. 21, the document said.