Today we continue our celebration and exploration of the original trilogy of Star Wars movies (plus-one) with a look at Episode VI. Return of the Jedi. In this final movie from the original three, the good guys win in the end after overcoming incredible odds, which was certainly a good result. Many fans and critics panned it for including the incredibly cute and furry Ewoks on the moon named Endor as a part of the storyline. Many thought one very tall Wookie was enough cuteness for the series. Yet the Ewoks did provide the setup to one of the movies best lines. The Ewoks thought one of Luke’s robots, C-3PO, was a god. Solo asked him to demonstrate some ‘god-like’ powers to which C- 3PO replied, “It is against my programming to impersonate a deity.”

This movie’s big reveal was that Luke and Princess Leia were twins and that she was now free to unabashedly pursue bad boy Han Solo. While Episode VI was the lowest grossing film of the original three, coming in at only $572MM worldwide, it was still a great ride and visually stunning. George Lucas’ in-house organ, Industrial Light & Magic (ILM), certainly earned their title for their special effects in the movie. The Sarlacc battle sequence was great, the speeder bike chase on the Endor moon was way cool and the space battle between Rebel and Imperial pilots was a great ride. At the Academy Awards ceremony for movies of that year, Richard Edlund, Dennis Muren, Ken Ralston, and Phil Tippett, all from ILM, received the Special Achievement Award for Visual Effects Oscar award.

I thought about this entry in the Star Wars oeuvre when I read that HSBC and the Department of Justice (DOJ) had petitioned the US District Court for the Eastern District of New York for the bank to be released from its five-year Deferred Prosecution Agreement (DPA) which was entered into in December 2012. Samuel Rubenfeld, writing in the Wall Street Journal (WSJ) Risk and Compliance Journal, said, “The expiration of HSBC Holdings PLC’s deferred-prosecution agreement releases the bank from its sword of Damocles, but the legacy of the agreement taught the industry some tough lessons about anti-money laundering compliance”.

Martin Arnold, writing in the Financial Times (FT), noted, “The ending of the DPA is a vindication for the outgoing management team of Douglas Flint, who retired as chairman this year, and Stuart Gulliver, who is due to hand over as chief executive to John Flint, his retail banking head, in February. Mr Flint and Mr Gulliver made it one of their priorities to clean up the bank’s anti-money laundering and sanction controls, investing more than $1bn in compliance technology and creating a financial crime risk unit that has more than 7,000 staff.” But there were more tangible effects as “the move is expected to allow HSBC to return more of the $8bn of trapped capital that regulators have forced it to keep in the US”.

HSBC obtained this result through extensive remediation in fulfilling the requirements of the DPA. Arnold cited to Stuart Levey, a former DOJ and US Treasury official, who HSBC hired as its chief legal officer in 2012, “We took the decision to apply US level standards across the entire bank, which we didn’t have to do, but it is clearly one of the reasons why the DOJ agreed to do a DPA rather than prosecute us. Of course we still have improvements to make and we always will.”

In a press release, chief executive Gulliver noted “HSBC is able to combat financial crime much more effectively today as the result of the significant reforms we have implemented over the last five years. We are committed to doing our part to protect the integrity of the global financial system, and further improvements to our own capability and contributions toward the partnerships we have established with governments in this area will remain a top priority for the bank into 2018 and beyond.”

Chad Bray, reporting in the New York Times (NYT) Dealbook column, said, “As part of the agreement, the bank bolstered its financial crime controls and added staff members in a broad reshaping of its compliance structure. An outside corporate monitor was appointed in 2013 as part of the agreement and was expected to continue to examine the effectiveness of the bank’s anti-money laundering and sanctions compliance systems.”

Rubenfeld spoke with Dan Wager, vice president of financial crime compliance at LexisNexis Risk Solutions, who “said the expiry indicates the bank addressed its systemic issues, “a task many thought was not possible.” He added that “Large financial institutions could no longer expect to spend their way out of the situation. They had to alter the systemic issues within their walls, and really truly address them.” He further added that government regulators would also learn from the HSBC enforcement action and DPA settlement resolution and that it might well become the template moving forward for remediation, concluding “Such an agreement has benefits that a criminal conviction doesn’t, he said, because it provides a roadmap for other banks to follow to enhance their compliance programs: “Some might say the entire financial system benefits from the pain of the target institution.””

At the end of the final episode of the first trilogy, Luke see the specters of Anakin Skywalker, Yoda and Obi Wan Kinobi in front of him. As the latest Death Star is destroyed, planets in the Rebel Alliance all celebrate. While I am not sure how much celebrating HSBC might be doing this week, they should have pride in making it through the five-year DPA. The bank worked very hard to overcome its miss-steps and hopefully it will continue to do so ethically and in compliance.

May the Force be with you.

My good friend Doug Cornelius is also running a week of Star Wars/compliance themed blog posts on his site Compliance Building. Check them out for his take on a more well-rounded Star Wars oeuvre.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2017

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