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Reuters blog archive
from Financial Regulatory Forum:
Exclusive: Consultancies on second tier as Justice Department seeks HSBC compliance monitor
By Brett Wolf, Compliance Complete
May 14, (Thomson Reuters Accelus) - Although a federal judge in Brooklyn has not yet signed-off on a deal between HSBC and the Justice Department that would settle allegations that anti-money laundering failures at the bank allowed drug cartels to launder hundreds of millions of dollars, candidates for a lucrative job policing the bank's compliance with the pact are scrambling to win the work.
Consulting firms are not being considered to lead the work, but may be hired to carry it out once a well-recognized anti-money laundering expert is hired as monitor, a source said.
"We're talking about a five-year, ironclad, wealthy contract. This is not hustling for billable hours," said a source familiar with the Justice Department's search for a so-called independent monitor. "There is an extraordinary amount of political jockeying going on to secure this work."
There is no reason for the Justice Department to rush its selection process. It cannot name a monitor – a key requirement of the deferred prosecution agreement (DPA) that Justice and HSBC inked in December – until District Judge John Gleeson approves the pact requiring one, sources said.
from Global Investing:
No one-way bet on yen, HSBC says
Will the yen continue to weaken?
Most people think so -- analysts polled by Reuters this month predict that the Japanese currency will fall 18 percent against the dollar this year. That will bring the currency to around 102 per dollar from current levels of 98. And all sorts of trades, from emerging debt to euro zone periphery stocks, are banking on a world of weak yen.
Now here is a contrary view. David Bloom, HSBC's head of global FX strategy, thinks one-way bets on the yen could prove dangerous. Here are some of the points he makes in his note today:
from Global Investing:
Cheaper oil and gold: a game changer for India?
Someone's loss is someone's gain and as Russian and South African markets reel from the recent oil and gold price rout, investors are getting ready to move more cash into commodity importer India.
Stubbornly high inflation and a big current account deficit are India's twin headaches. Lower oil and gold prices will help with both. India’s headline inflation index is likely to head lower, potentially opening room for more interest rate cuts. That in turn could reduce gold demand from Indians who have stepped up purchases of the yellow metal in recent years as a hedge against inflation.
from Unstructured Finance:
Hedge fund scorecard 2012: Mortgage masters win, Paulson on bottom again
Mortgage funds roared home with returns of almost 19 percent last year, trouncing all other hedge fund strategies and beating the S&P 500 stock index, which rose 13 percent.
BTG Pactual's $245.5 million Distressed Mortgage Fund, which invests primarily in distressed non-agency Residential Mortgage-Backed Securities (RMBS), returned about 46 percent for the year, putting it at the top of HSBC Private Bank's list of the Top 20 performing hedge funds and making it one of 2012's best performing funds. Bear in mind the the average hedge fund gained only 6 percent last year.
from Global Investing:
Emerging debt vs equity: to rotate or not
Emerging bonds have got off to a flying start in 2013, with debt funds taking in over $2 billion this past week, the second highest weekly inflow ever, according to fund tracker EPFR Global. Issuance is strong - Turkey for instance this week borrowed cash repayable in 10 years for just 3.47 percent, its lowest yield ever in the dollar market.
Yet not everyone is optimistic and most analysts see last year's returns of 16-18 percent EM debt returns as out of reach. The consensus instead seems to be for 5-8 percent as tight spreads and low yields leave little room for further rallies -- average yields on the EMBI Global sovereign debt index is just 4.4 percent. Domestic bonds meanwhile could suffer if inflation turns problematic. (see here for our story on emerging bond sales and returns).
from Stories I’d like to see:
The NRA playbook, Obama’s pot dilemma, and HSBC’s money laundering
1. Getting the NRA’s massacre playbook:
In the wake of the Newtown, Connecticut, massacre, we’ve been reading a lot about school lockdowns and other emergency drills. Here’s an idea for some original reporting about a different kind of emergency drill: Reporters ought to get sources inside the National Rifle Association, or people who deal with the organization, to reveal the playbook the NRA must have developed by now to make sure the group can swing into action whenever there’s an outbreak of mass gun carnage.
Is there an email or phone list in place so that the first crisis team conference call can be convened quickly? Who’s on it in addition to NRA staff? Gun company executives? Lobbyists? Pollsters? PR people?
from The Great Debate:
The color of money shouldn’t be blood red
HSBC’s $1.92 billion payment to U.S. authorities to avoid prosecution for money-laundering practices, including transferring funds for Mexican drug cartels, raises serious questions about the flow of narco-cash in the international banking system. The time has come to tackle the culture of impunity that allows these illegal transactions.
The illicit drug trade remains international organized crime syndicates’ most lucrative source of income. Drug traffickers may be laundering up to 70 percent of the estimated $320 billion they make from illicit drugs annually, according to United Nations Office of Drugs and Crime (UNODC). Yet officials have been able to seize less than 1 percent of this.
from Financial Regulatory Forum:
Less drug-money traffic at HSBC may mean more risk for other banks in U.S.
By Brett Wolf, Compliance Complete
NEW YORK, Dec. 13 (Thomson Reuters Accelus) - HSBC was a hotspot for Mexican drug traffickers trying to launder the proceeds of their illicit U.S. sales during the 2000s, as suggested by a Senate report released in July and verified by a deferred prosecution agreement announced by the Justice Department on Tuesday. But now that the British banking giant has been forced to take steps to clean up its anti-money laundering act, Mexican cartels are making moves that may mean more risk for other banks, sources said.
Eager to move cash through the teller windows of HSBC's Mexico unit in the largest amounts possible — sometimes as much as hundreds of thousands of dollars per day — drug traffickers designed specially shaped boxes, a document released by the Justice Department on Tuesday states. Once the cash was in HSBC accounts, brokers wired it to exporters in New York City and elsewhere in the United States as payment for goods destined for Colombian businesses, according to a"statement of facts" that was filed in federal court in Brooklyn along with a deferred prosecution agreement (DPA).
from Breakingviews:
Record fine shows some banks are too big to indict
By Dominic Elliott
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
HSBC’s $1.9 billion fine for money-laundering is a record for a bank, but its one-off nature means that it’s largely symbolic for an institution with a market cap of 118 billion pounds. The outcome could have been worse. Some U.S. regulators wanted to indict the UK lender, according to a New York Times report, but they backed down on fears that a heavy-handed approach could destroy HSBC’s U.S. arm and destabilise the wider banking system.
from Global Investing:
Moody’s takes some pressure off Turkey
Moody's disappointed a lot of folks this week when it failed to raise Turkey's credit rating to investment grade.
After Fitch upped Turkey on Nov 5 into the coveted top tier, hopes were high that Moody's would do the same and soon. Being rated investment grade by at least two agencies has a lot of pluses . But all the subsequent investment inflows have side effects and one of them is currency appreciation. Check out these graphs. (click to enlarge)
