HSBC money laundering report's release likely delayed: U.S. judge

[February 10, 2016]  By Nate Raymond

NEW YORK (Reuters) - A U.S. judge said Tuesday that he would likely delay the release of a report detailing how well HSBC Holdings Plc has complied with anti-money laundering requirements until a federal appeals court could weigh in.

U.S. District Judge John Gleeson in Brooklyn, New York, did not rule on whether he would put on hold his order requiring the unsealing of a report by a federal monitor appointed as part of a $1.9 billion pact with the U.S. Justice Department in 2012.

But Gleeson said he was "strongly inclined" to grant HSBC a stay of his Jan. 28 order, and that a lawyer representing a HSBC mortgage customer seeking its unsealing would be unlikely to convince him otherwise.

"He's going to have a tough road convincing me otherwise," Gleeson said in court.

Gleeson said he still wanted HSBC and prosecutors to propose redactions to the report before the case is taken up on appeal. He extended the deadline to complete that process from Feb. 12 to Feb. 26.

The hearing came after Gleeson ordered the release of a January 2015 report by Michael Cherkasky, a former New York prosecutor who was appointed federal monitor as part a five-year deferred prosecution agreement with HSBC.

The deal resolved charges that HSBC had become a "preferred financial institution" for Mexican drug cartels and other money launderers and conducted transactions for customers in several countries subject to U.S. sanctions.

The report by Cherkasky, now the executive chairman of the compliance company Exiger, was to be kept under wraps.

But Hubert Dean Moore of Pennsylvania, who said he had been an HSBC mortgage customer before filing for bankruptcy, asked that it be unsealed so he could review whether HSBC "continues to engage in unsafe and unsound business practices."

HSBC and the Justice Department have opposed unsealing the report. They had argued unsealing the report could provide a "road map" for criminals seeking to launder money and discourage people from cooperating with the monitor.

Both HSBC and the Justice Department have filed notices of appeal.

Samuel Seymour, HSBC's lawyer, said on Tuesday the ruling had hurt the bank by calling into question assurances given to foreign regulators who, in being convinced to provide information to the monitor, were told the report would be kept secret.

"It affects regulatory relationships it has today," he said in court. "The harm is being felt now."

The case is U.S. v. HSBC Bank USA NA et al, U.S. District Court, Eastern District of New York, No. 12-cr-00763.

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