OCC Issues Largest Penalty It Has Ever Assessed

11 December 2012 Consumer Class Defense Counsel Blog

Today, the Office of the Comptroller of the Currency (OCC) announced a $500 million penalty against a national bank, HSBC Bank USA, N.A. The OCC’s penalty was based upon its determination that HSBC had violated the Bank Secrecy Act.  Separately, the OCC announced that it had issued a cease and desist order to HSBC to address deficiencies in the bank’s compliance program. 

The Comptroller of the Currency, Thomas J. Curry, stated that the penalty is the largest penalty the OCC has ever assessed. Comptroller Curry advised that the penalty reflects the severity and duration of the violation and demonstrates the OCC’s resolve to take firm action when warranted to ensure compliance with the law and to hold banks accountable when they fail to live up to those standards. 

In other words, this appears to be the OCC’s shot across the bow of the industry to show that the OCC has not lost its ability to flex its muscles when needed to keep banks in line. The OCC’s enforcement action is part of a larger coordinated effort with the Department of Justice, the Federal Reserve, the Financial Crimes Enforcement Network, the Office of Foreign Assets Control, and the New York County District Attorney’s Office. Thus, the size of the penalty leaves one to wonder whether the OCC was flexing its muscles to get the collective attention of the national banks, or to prove to its sister agencies and state agencies that it is quite capable of doing its job. The penalty also leaves one to wonder whether the OCC’s strong statement is an indication of the current administrations intent to bring an increased number of enforcement actions. 

In addition to the OCC’s penalty, the bank entered into an agreement with the Department of Justice which requires the bank to forfeit $1.256 billion to the government. The Board of Governors and the Federal Reserve further jointly assessed a $165 million civil money penalty against the Bank and its subsidiary.   

Cynically speaking, with penalties this size, the agencies may not have to issue budget cuts as severe as feared if the legislature can’t stop the bus from driving off the fiscal cliff. No matter the motives of the OCC in levying the heavy penalty, it is clear that each actor in the financial services industry must ensure that it has a robust compliance program that is monitored and updated frequently.

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