London-based banking giant HSBC Holdings announced last week that it plans to hire thousands of additional compliance officers as the bank continues to battle a host of legal troubles.

Susan Wright, HSBC's head of financial crime external relations, compared HSBC's recruitment drive to that of JP Morgan, which recently announced plans to assign 3,000 employees to its “control staff” to work on legal and regulatory matters.

“Our [compliance] resources have increased substantially. I can't give the exact figure, but JP Morgan's number is very similar to where we will be,” Wright stated in remarks at a conference on financial crime hosted by the British Bankers' Association. “We have four business lines and heads of finance crime embedded in each one.”

Wright said the new job positions will bring HSBC's total compliance staff to more than 5,000, almost two percent of its global workforce which has decreased by over 40,000 in the past two years, according to The Times.

The move follows a record $1.9 billion settlement that HSBC reached with U.S. Justice Department for anti-money laundering and sanctions violations. The settlement included a record $1.2 billion forfeiture as part of its deferred prosecution agreement reached with the Justice Department for violations of the Bank Secrecy Act (BSA), the International Emergency Economic Powers Act (IEEPA) and the Trading with the Enemy Act (TWEA). 

As Compliance Week previously reported, the Justice Department charged HSBC Bank USA with violations of the BSA by failing to maintain an effective anti-money laundering program, and failing to conduct appropriate due diligence on its foreign correspondent account holders.  The HSBC Group violated IEEPA and TWEA by illegally conducting transactions on behalf of customers in Cuba, Iran, Libya, Sudan and Burma—all countries that were subject to sanctions enforced by the Office of Foreign Assets Control (OFAC) at the time of the transactions.

By failing to implement proper anti-money laundering controls, HSBC facilitated the laundering of at least $881 million in drug proceeds through the U.S. financial system, according to the Justice Department. 

In addition to forfeiting $1.2 billion as part of its DPA, HSBC has also agreed to pay $665 million in civil penalties, including $500 million to the Office of the Comptroller of the Currency (OCC) and $165 million to the Federal Reserve, for its AML program violations. The OCC penalty also satisfies a $500 million civil penalty of the Financial Crimes Enforcement Network. The bank's $375 million settlement agreement with OFAC is satisfied by the forfeiture to the Department of Justice.

More Restructuring

In December 2012, HSBC appointed Robert Werner as head of group financial crime compliance, and group money-laundering reporting officer in an attempt to fix its weak anti-money laundering controls.

HSBC said the newly-created role follows a compliance restructure, which separates financial crime compliance from other areas of compliance. Werner is responsible for developing HSBC's global strategy, standards, systems and policies in areas such as anti-money laundering, counter-terrorist financing, proliferation funding, anti-bribery and sanctions. He also has global responsibility for their implementation and operations.

Werner also oversees global financial crime compliance assurance by working with regional and local assurance teams to ensure consistent and effective application of, and adherence to, global financial crime standards, policies and procedures across the group. He works with Security & Fraud Risk to establish a Global Financial Intelligence Unit to work with the business financial intelligence units, creating the capacity to conduct sensitive in-house investigations into potential regulatory breaches.