Criminal Penalties Against Banks Leads to Windfall for D.A.

You may recall allegations against various banks – notably HSBC and others – for money laundering and violation of U.S. trade sanctions. Interestingly, the criminal cases against the banks (HSBC, Standard Chartered and BNP Paribas), have led to a windfall for the Manhattan D.A.’s office. District Attorney Cyrus Vance Jr. has announced a number of programs to be funded by the more than $800 million in criminal penalties collected from the banks. The money must be spent on criminal justice projects.

  • Thus far, programs utilizing the funds have been announced in the following areas:
  • Grants to agencies throughout the United States to test rape kits now sitting in police storage facilities.
  • Setting up an international center focusing on stopping cyberattacks.
  • Start-up funding for a new institute at New York’s John Jay College of Criminal Justice.
  • Grants to non-profits studying flaws and inequities in the criminal justice system, particularly as they relate to criminal penalties.
  • New equipment (about $90 million worth) aimed at crime reduction, including cell phones and tablets for police officers.
  • A grant of more than $100 million to fund improved lighting, locks and security cameras at New York City housing projects.
  • Money has been provided to prosecutors in the other boroughs of NYC for cybercrime detection.
  • A grant to the city’s medical examiner’s office for equipment and training.
  • Money has been provided to state agencies for license plate readers on the New York Thruway.

Thus far, the D.A.’s office has allocated $459 million from the fund, and almost $70 has been disbursed.

While the amount of money collected in criminal penalties is staggering, it demonstrates some of the problems that banks – in particular HSBC – have had in the criminal arena over the past 15 years or so, prior to its more recent troubles. In 2001. HSBC’s Republic New York division entered a guilty plea to charges of securities fraud and conspiracy, including a Ponzi scheme that impacted Japanese companies to the tune of hundreds of millions of dollars. Then there were repeated violations of banking regulations; allowing its name to be used in connection with the fraudulent sale of financial products; allegations of assisting wealthy Americans to evade income taxes; not protecting customer confidential information; abuses related to sale of auction-rate securities and mortgage-backed securities; and the list goes on.

Time will tell whether the earmarking of the funds for the projects designated by the D.A.’s office will have a significant impact on the criminal justice system.

George Vomvolakis Law Offices
275 Madison Avenue
New York, NY 10016
(212) 682-0700