• Banking giant HSBC to pay record $1.9 billion in money-laundering case

    Stefan Wermuth / Reuters, file

    The investigation HSBC -- Europe's largest bank by market value -- has focused on the transfer of funds through the U.S. financial system from Mexican drug cartels and on behalf of nations like Iran that are under international sanctions.

    By NBC News staff and wire services

    British banking giant HSBC has agreed to pay more than $1.9 billion to U.S. authorities -- the largest penalty ever paid by a bank -- after failing to abide by anti-money laundering and sanctions laws, it said on Tuesday.

    The investigation of the bank -- Europe's largest by market value -- has focused on the transfer of funds through the U.S. financial system from Mexican drug cartels and on behalf of nations like Iran that are under international sanctions. 

    The bank said in a statement  that it had also “clawed back” bonuses from a number of senior staff, spent more than $290 million on “remedial measures” and taken steps to limit business in “countries that pose a high financial crime risk.”

    The statement added that the bank was also expected to finalize an agreement with the U.K. Financial Services Authority “shortly.”

    Stuart Gulliver, chief executive of HSBC Group, said in the statement that the bank was a “fundamentally different organization” now.

    "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again,” he said.

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    "While we welcome the clarity that these agreements bring, ensuring the highest standards wherever we do business is an ongoing process,” Gulliver added. “We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world."

    The statement, which included a string of measures taken by the bank to address the problems, also said that an independent monitor would assess HSBC’s progress over the five-year term of the agreement with the Justice Department.

    The agreement with the Justice Department noted that HSBC Bank USA and HSBC Group had "provided valuable assistance to law enforcement," according to the bank’s statement.

    U.S. and European banks have now agreed to settlements with U.S. regulators totaling some $5 billion in recent years on charges they violated U.S. sanctions and failed to police illicit transactions, Reuters reported.


    No bank or bank executives, however, have been indicted as prosecutors have instead utilized deferred prosecutions, the wire service said.

    Analyst Jim Antos, of Mizuho Securities, said the statement on Tuesday indicates an extra $420 million for the settlement costs, calling it a "trivial" figure in terms of the company's book value, Reuters reported.

    "But in terms of real cash terms, that's a huge fine to pay," Antos added, who rates HSBC a "buy."

    U.S. justice department officials are expected to detail the settlement later Tuesday, according to Reuters.

    HSBC's settlement comes a day after rival British bank Standard Chartered agreed to a $327 million settlement with U.S. law enforcement agencies for sanctions violations, a pact that follows a $340 million settlement the bank reached with the New York bank regulator in August.

    CNBC's Eamon Javers reports the detail on an investigation of HSBC's lending practices.

    Medicare fraud case
    Such settlements have become commonplace. In what had been the largest settlement until this week, ING Bank NV in June agreed to pay $619 million to settle U.S. government allegations it violated sanctions against countries including Cuba and Iran.

    Other banks that have reached settlements over sanctions violations are Credit Suisse Group, Lloyds Banking Group, Barclays and ABN Amro Holding NV.

    In the United States, J.P. Morgan Chase & Co., Wachovia Corp. and Citigroup Inc. have been cited for anti-money laundering lapses or sanctions violations.

    HSBC's failings date to 2003, when the Federal Reserve Bank of New York and New York state regulators ordered the bank to better monitor suspicious money flows.

    In 2010, a consent order from the Comptroller of the Currency (OCC) ordered HSBC to review suspicious transactions moving through the bank, Reuters reported. At the time, the OCC called HSBC's compliance program "ineffective."

    In 2008, the U.S. Attorney in Wheeling, West Virginia, began investigating HSBC and how a local pain doctor allegedly used the bank to launder Medicare fraud.

    Ultimately, that prosecutor's office came to believe the case was "the tip of the iceberg" in terms of the suspicious transactions conducted through HSBC, according to documents reviewed by Reuters and reported earlier this year.

    Reuters and The Associated Press contributed to this report.

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  • Suspects who allegedly stole $1 million from casinos indicted

    By Tony Shin, NBCSanDiego.com

    SAN DIEGO -- A total of 14 suspects have been indicted on accusations they stole about a million dollars from casinos in California and Nevada.


    The suspects were allegedly able to confuse the banking system, according to officials. Investigators said the suspects took advantage of a loophole in the Citibank system.

    Officials said the suspects would open accounts at various Citibanks in Southern California, including San Diego. They would then go to a casino cash advance kiosk and withdraw money.

    Because of that loophole, a suspect could make multiple withdrawals for the same amount of money, as long as it happened within 60 seconds and all those withdrawals would count as duplicate transactions.

    Cash used to gamble
    The suspect could then overdraw the account by tens of thousands of dollars.

    The suspect would then take the cash receipts to a cashier and collect all the money.

    Read more from NBCSanDiego.com

    "Some of that cash appears to have been used to gamble at casinos where the fraud was conducted or nearby casinos, such was the volume of the gambling that they were comped free rooms at the casinos,” Assistant U.S. Attorney Sean Coyle said.

    Prosecutors said the suspects allegedly withdrew about $1 million during an eight-month period.

    Authorities are still looking to arrest one person, the other 13 have already been apprehended.

    FBI agents said the loophole in the Citibank system has now been closed.

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  • Regulators to big US banks: Don't count on government help if you get in trouble

    By Rick Rockather, Reuters

    U.S. regulators directed five of the country's biggest banks, including Bank of America Corp and Goldman Sachs Group Inc, to develop plans for staving off collapse if they faced serious problems, emphasizing that the banks could not count on government help.

    The two-year-old program, which has been largely secret until now, is in addition to the "living wills" the banks crafted to help regulators dismantle them if they actually do fail. It shows how hard regulators are working to ensure that banks have plans for worst-case scenarios and can act rationally in times of distress.

    Officials like Lehman Brothers former Chief Executive Dick Fuld have been criticized for having been too hesitant to take bold steps to solve their banks' problems during the financial crisis.

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    According to documents obtained by Reuters, the Federal Reserve and the U.S. Office of the Comptroller of the Currency first directed five banks -- which also include Citigroup Inc., Morgan Stanley and JPMorgan Chase & Co -- to come up with these "recovery plans" in May 2010.

    They told banks to consider drastic efforts to prevent failure in times of distress, including selling off businesses, finding other funding sources if regular borrowing markets shut them out, and reducing risk. The plans must be feasible to execute within three to six months, and banks were to "make no assumption of extraordinary support from the public sector," according to the documents.

    Spokespeople for the five banks declined to comment. The Federal Reserve also declined to comment.

    'Protecting the system'
    Recovery plans differ from living wills, also known as "resolution plans," which are required under the 2010 Dodd-Frank financial reform law. Living wills aim to end bailouts of too-big-to-fail banks by showing how they would liquidate themselves without imperiling the financial system.

    "Recovery plans are about protecting the crown jewels," said Paul Cantwell, a managing director at consulting firm Alvarez & Marsal. "It's about, 'How do I sell off non-core assets?' The priority is to the shareholders. A resolution plan is about protecting the system, taxpayers and creditors."

    NY regulator may pull license of 'rogue' UK bank over Iran deals

    The recovery plans are being used as part of regulators' ongoing supervisory process. In Britain, recovery and resolution plans have both been part of the living will requirements for large banks.

    Mike Brosnan, senior deputy comptroller for large banks at the OCC, said the regulator continuously evaluates contingency planning at the banks and savings associations it supervises.

    "Recovery plans required of the largest banks are helpful in ensuring banks and regulators are prepared to manage periods of severe financial distress or instability affecting the banking sector," he said.

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    This summer, nine global banks submitted living wills to the Fed and Federal Deposit Insurance Corp, and regulators released the public portion of the documents.

    The recovery plans requested in 2010, meanwhile, have received little publicity. The names of the banks required to submit them have not been previously disclosed, and Reuters obtained them only through a Freedom of Information Act request.

    The Fed supplied Reuters with the letters requesting plans from banks, but not the banks' actual plans because they were deemed confidential supervisory information. The regulator said it was withholding 5,100 pages of information.

    JPMorgan Chase CEO Jamie Dimon, long one of the most vocal critics of regulations aimed at curbing risky trading, announced a $2 billion loss after taking a risky bet that didn't pay off. CNBC's Andrew Ross Sorkin reports.

    Reputations, but not balance sheets, damaged
    Five years after the financial crisis, concerns remain about whether blow-ups at big banks could lead to another round of taxpayer bailouts. Trading losses have cost JPMorgan nearly $6 billion so far, and scandals such as the alleged rigging of an international interest rate benchmark have only highlighted the risks lurking inside big banks.

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    These disasters have damaged banks' reputations, but not their balance sheets. Most are still profitable, and in recent years the five banks have improved their capital bases and liquidity. They also have been subjected to annual Federal Reserve stress tests that measure whether the banks have sufficient capital to weather severe economic scenarios.

    Bank of America and Citigroup, in a sense, have already been executing the kind of moves called for in the recovery plans. Both have been selling off non-core operations and assets to streamline their sprawling businesses, after receiving multiple bailouts during the financial crisis.

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    Bank of America in June 2011 told Fed officials that it could shed branches in some parts of the country if it needed to raise capital in an emergency, a person familiar with the matter said in January. The proposal was part of a series of options provided to the Fed, including issuing a tracking stock for Bank of America's Merrill Lynch operations.

    But just because the bank proposed selling branches does not mean it's a desirable move or highly probable, the person said. In the past year, Bank of America has shown progress in building capital without such actions. Its Tier 1 common capital ratio increased to 11.24 percent of risk-weighted assets as of June 30 from 8.23 percent a year earlier.

    Tier 1 refers to a bank's core capital and has been the main focus of regulators in assessing a bank's capital adequacy.

    Report: HSBC allowed money laundering that likely funded terror, drugs

    The banks' chief risk officers, and in the case of Citigroup, Chief Executive Vikram Pandit, received letters in May 2010 instructing them on what to include in the recovery plans. The requests stemmed from January 2010 crisis management meetings held by regulators. The letters sent to the five banks were nearly identical.

    JPMorgan's blunder amplifies calls for tighter regulation

    Each plan was to address severe financial stress at the firm, as well as "general financial instability." The plans should be capable of being executed ideally within three months, but no longer than six months, the documents said.

    The plans should "make appropriate assumptions as to the valuations of assets and off-balance sheet positions," the documents said.

    David Gregory, Meet the Press moderator, discusses JPMorgan CEO Jamie Dimon's interview on his show prior to the announcement of the firm's $2 billion trading loss.

    Recovery plans have been mentioned in public before, but only in passing. In testimony to Congress in July 2010, Fed Governor Daniel Tarullo said the "largest internationally active U.S. banking organizations" were working on recovery plans. The initiative stemmed from work led by the Financial Stability Board, a body that coordinates the work of international financial regulators, he said.

    In a presentation in March, JPMorgan Chase said it had a recovery plan in place and said it was ordered by regulators. The presentation was organized by Harvard Law School and was closed to the media at the time, but is available online. 

  • FBI: Man with ties to extremist movement threatened to kill bank employees

    By Shimon Prokupecz, NBCNewYork.com

    NEW YORK -- The FBI arrested a Queens man with ties to anti-government extremism Tuesday night for allegedly threatening to kill employees at a Pennsylvania bank, law enforcement sources said.
     
    Law enforcement sources say Michael Chung faxed a threatening letter to a Sovereign Bank branch in Pottsville. In the letter, he cited the Second Amendment and threatened to kill employees of the bank, law enforcement sources said.

    The letter read, in part, "The 2nd Amendment to the National Constitution authorizes the use of deadly force to protect my interests as a national citizen.  I believe I have a basis to act in that manner."

    Chung, 52, had a loan with the bank that may have been preventing him from selling his Bayside home, law enforcement sources said. There may be a lien on his house.

    See the original report on NBCNewYork.com

    A law enforcement official says Chung has a shotgun registered in his name. It's not clear if the weapon has been recovered. 

    Watch US News crime videos on NBCNews.com

    A law enforcement official said Chung is part of the "sovereign citizen" movement, a loose grouping of people who don't believe in following government authority and paying taxes. The FBI has long considered sovereign citizens a domestic terror threat and monitors the movement. 

    Chung was scheduled to be arraigned later Wednesday in federal court in Brooklyn. It wasn't immediately known if he had an attorney. 

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  • Dead or alive? FBI hunts Georgia banker accused of embezzling millions

    The FBI is offering up to $20,000 for information leading to the arrest of a Georgia banker who disappeared in June along with millions of dollars in bank funds.

    Authorities are looking for Aubrey Lee Price, who went missing June 16. He is wanted for wire fraud. Before Price, disappeared, the FBI said he told acquaintances "he had lost a large amount of money through trading activities and that he planned to kill himself."


    Price was responsible for investing approximately $17 million for the Montgomery Bank & Trust in Ailey, Ga., about 170 miles southeast of Atlanta.

    The U.S. Attorney's Office complaint claims that Price instead wired the money to accounts he controls at other banks. Price allegedly also tried to fool the bank by giving altered documents to management.

    Price, 46, was last seen getting on a ferry boat in Key West, Fla., en route to Fort Myers, Fla.

    Though Price claimed in notes to friends that he intended to kill himself, NBC-2.com reported that the Coast Guard has not found his body and the FBI believes he's still alive.

    Price has connections in not only Florida, but also Georgia, and may travel to Guatemala or Venezuela, according to the FBI.

    Those with any information about this case or Price's whereabouts are asked to contact the FBI.

    Last Friday, the Georgia Department of Banking and Finance closed the bank and the Federal Deposit Insurance Corporation (FDIC) was named "receiver." The two branches of the Montgomery Bank & Trust were set to be reopened for customers on Monday, under Ameris Bank.

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  • Ex-cop: I robbed bank to get health care in prison

    By msnbc.com staff

    A former Georgia police officer told a court that he robbed a bank last year so that he could get health care while in a federal prison.

    Edward Pascucci told U.S. District Court Judge Clay D. Land on Thursday that he was facing “severe health problems” and homelessness when he decided to rob the Citizens Trust Bank in Columbus, Ga., last August, according to the Columbus Ledger-Enquirer.

    “I didn’t want to be homeless,” Pascucci said, according to the paper. “I should not have manipulated the justice system, but I couldn’t think of any other way to get help.”

    The FBI said Pascucci, 54, walked out of the bank with more than $1,000, ABC station WTVM-TV of Columbus, Ga., reported. He had been jobless for more than a year when the crime occurred.   

    According to WTVM, FBI agents said Pascucci walked into the Citizens Trust Bank with a .357-caliber revolver on Aug. 3 and demanded money. The gun reportedly was not loaded.

    Investigators said a security guard stopped Pascucci after he walked out of the bank and held him until a Columbus police officer could arrest him.

    Pascucci, who served as a Columbus policeman for 15 years, got his wish -- he was sentenced to five years and three months in prison. In keeping with the terms of a plea agreement, he also was ordered to serve three years of supervised release. He was given credit for time served awaiting sentencing.

    According to the Ledger-Enquirer, Pascucci served in the Marines, Army and Army Reserve before becoming a police officer in 1989.

    The newspaper reported that Pascucci had a troubled employment history with the police department that prompted a psychologist in 2002 to recommend he no longer serve on the force. He transferred to animal control that year, according to the Ledger-Enquirer, but resigned in March 2006 in lieu of an appeal for unprofessional conduct.

    Described by the Ledger-Enquirer as being shackled and dressed in a yellow jumpsuit with the word “federal” emblazoned on it, Pascucci apologized to the employees of the Citizens Trust Bank, to his former colleagues at the Columbus Police Department and to the “community at large.”

    “I had no funds whatsoever left to live on,” he said. “I did this foolish thing hoping I’d get some kind of care.”

    On Aug. 3, he walked into the bank about 11 a.m. and presented a note to the teller that read, “This is a stick up, hand over the money,” according to court documents.

    The teller gave him $1,040, prosecutors said, and Pascucci walked out of the bank.

    Pascucci, the Ledger-Enquirer reported, told authorities he removed the bullets from his gun before entering the bank. Officials later recovered those bullets during a search of Pascucci’s car.

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