State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the worldˇs largest banks and ultimately destabilize the global financial system.
Instead, HSBC announced on Tuesday that it had agreed to a record $1.92 billion settlement with authorities. The bank, which is based in Britain, faces accusations that it transferred billions of dollars for nations like Iran and enabled Mexican drug cartels to move money illegally through its American subsidiaries.
While the settlement with HSBC is a major victory for the government, the case raises questions about whether certain financial institutions, having grown so large and interconnected, are too big to indict. Four years after the failure of Lehman Brothersnearly toppled the financial system, regulators are still wary that a single institution could undermine the recovery of the industry and the economy.
But the threat of criminal prosecution acts as a powerful deterrent. If authorities signal such actions are remote for big banks, the threat could lose its sting.
Behind the scenes, authorities debated for months the advantages and perils of a criminal indictment against HSBC.
Some prosecutors at the Justice Departmentˇs criminal division and the Manhattan district attorneyˇs office wanted the bank to plead guilty to violations of the federal Bank Secrecy Act, according to the officials with direct knowledge of the matter, who spoke on the condition of anonymity. The law requires financial institutions to report any cash transaction of $10,000 or more and to bring any dubious activity to the attention of regulators.
