Attestation Update – A&A for CPAs

Technical stuff for CPAs providing attestation services

A few more updates in the ongoing world-wide banking fiascos

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Image courtesy of Adobe Stock.

Image courtesy of Adobe Stock.

A few recent reports: Reason for no criminal prosecution of one too-big-to-fail bank is that it was TBTF, an indictment and a settlement in forex cases, and progress in the money laundering investigations.

Since I use the term a lot, here is a definition of fiasco from Google:

a thing that is a complete failure, especially in a ludicrous or humiliating way. Synonyms: failure, disaster, catastrophe, debacle, shambles, farce, mess, wreck.

Seems to me throwing away $530 million of bank capital because bank staff and leaders wanted to cheat customers meets the definition of fiasco.

7/11 – Francine McKenna at Market Watch – HSBC wasn’t prosecuted because it was ‘too big to fail’: House Committee – A House committee concluded that HSBC wasn’t prosecuted for willful AML violations because it was TBTF. One part of the violations was intentionally leaving out of wire instructions any indication that the funds were related to activity in countries with bans.

Staff recommendations were to pursue a criminal prosecution. Attorney General Eric Holder determined the systemic risk was too high and thus agreed to a deferred prosecution agreement.

Article explains AG Holder indicated in March 2013 testimony that TBTF was a factor in not prosecuting some banks. He walked back that position in May 2013 testimony.

The internal documents reviewed by the House committee verified that TBTF was the factor behind letting HSBC off with a DPA.

7/20 – Bloomberg – U.S. Charges HSBC Official in FX Rigging Probe – HSBC’s international boss over foreign exchange trading was arrested as he was waiting to fly back to London. He will be charged on 7/21 in a newly unsealed indictment Another top-level HSBC manager was also indicted.

These are apparently the first arrests in the ongoing investigation of allegedly widespread alleged manipulation of foreign exchange rates.

Unidentified sources assert there may be charges for this and other specific teams who are being investigation for FX manipulation.

Article says HSBC has already paid $618M to US and UK regulators. My notes show $341M to UK FCA and $275M to US CFTC. Article says HSBC has publicly disclosed they set aside $1.3B for settlements with US DoJ.

With private settlements, that brings the likely tab to HSBC stockholders to about $2.2B.

7/27 – Francine McKenna at Market Watch – State Street forex settlement is notch in belt for Madoff whistleblower – State Street Bank and Trust Company admitted adjusting foreign exchange rates up or down for its customers’ trades between 1998 and 2009. This resulted in State Street making more money and trades at the expense of its customers.

Company settled up for $530M of stockholder money, including $155M to DoJ, $167M to SEC, $60M to pension plan clients, and $148M for private class-action suits.

On Forex settlements, my notes show $12.9B actual settlements industry-wide to date with my guess of another $2.6B possible additional settlements. That puts my guess on the total cost to stockholders for industry wide manipulation of foreign exchange rates at $15.5B. That is closing in on throwing away sixteen billion dollars of investor money to settle up. Yeah, that’s a fiasco.

7/26 – Reuters – Swiss to pass information on HSBC accounts to U.S. tax agency – The Swiss government plans to send information on private accounts which appear to be held by U.S. citizens to the IRS. The specific banking entity involved is HSBC Private Bank, a subsidiary of HSBC.

Account holders have 30 days to file an objection to sharing their information.

Friendly tip to Americans with funds at HSBC Private Bank:  Get a criminal defense attorney on retainer. Quickly.

Written by Jim Ulvog

July 28, 2016, 8:17 am at 8:17 am

Posted in Other stuff

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