HSBC became bank to drug cartels, pays big for lapses

(Reuters) - In February 2008, Mexican authorities told the CEO of HSBC Holdings Plc's Mexico unit that a local drug lord referred to the bank as the "place to launder money," U.S. prosecutors said on Tuesday, as they announced a record $1.92 billion settlement with the British bank.

Lax money laundering controls at HSBC allowed two cartels - one each in Mexico and Colombia - to move $881 million in drug proceeds through the bank over the second half of the last decade, according to prosecutors and federal court documents.

So rampant was the practice, prosecutors said, that on some days drug traffickers deposited hundreds of thousands of dollars at HSBC Mexico accounts. To speed things along, the criminals even designed "specially shaped boxes" that fit the size of teller windows at HSBC branches, according to the documents.

Prosecutors said a multi-year, multi-agency probe into such transactions revealed how HSBC had degenerated into the "preferred financial institution" for drug traffickers and money launderers. And on Tuesday, that culminated in a far-reaching deferred prosecution agreement with HSBC.

An HSBC spokesman declined to discuss specific transactions or clients. But as part of the agreement, the bank acknowledged major lapses in compliance and ignoring red flags. It also acknowledged enabling clients to avoid U.S. sanctions that prohibit dealings with countries such as Iran, Libya, Sudan, Myanmar and Cuba.

The bank agreed to take steps to fix problems, forfeit $1.256 billion, and retain a compliance monitor. It also agreed to pay $665 million in civil penalties to resolve regulatory actions by the U.S. Office of the Comptroller of the Currency, the Federal Reserve, the Treasury Department and others.

"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes," HSBC Chief Executive Stuart Gulliver said.

The settlement, the largest penalty ever paid by a bank, had been expected.

In November, the bank told investors its penalty could exceed $1.5 billion. And many of the details of the bank's lapses that allowed shadowy money to sluice through HSBC were contained in a U.S. Senate investigative report in July.

HSBC shares closed up 0.6 percent in London on Tuesday, and its Hong Kong-listed shares were up about 0.25 percent by late morning on Wednesday.

MONEY LAUNDERING AND WASHING MACHINES

Top U.S. law-enforcement officials, standing sternly at a news conference in Brooklyn, New York, gave new details on Tuesday of how the bank was used. They pointed to flow charts decorated with green dollar bills showing how cartels used HSBC accounts to move money through Mexico, Colombia and elsewhere.

In one type of money-laundering transaction, the documents show how millions of dollars of drug money flowed through HSBC as Colombian drug cartels used the so-called Black Market Peso Exchange to convert U.S. dollars to Colombian pesos.

In a multi-step laundering process, middlemen - referred to as peso brokers - used U.S. dollars from drug cartels to buy consumer goods such as washing machines and then exported them to Colombia, where they were sold, according to the documents and a source familiar with the situation. Part of the sale proceeds, now in Colombian pesos, was then given back to the drug cartels, the documents show.

Other transactions involved Mexican drug cartels, prosecutors said.

After the February 2008 meeting with Mexican authorities, HSBC conducted an internal inquiry that found a small number of Mexican clients accounted for a large percentage of the U.S. dollars moving through HSBC, according to the documents, which include a "statement of facts" that HSBC has agreed to.

A significant sum ultimately was traced to the city of Culiacan in the rugged Mexican state of Sinaloa, home to one of Mexico's powerful drug gangs that is directed by the country's most-wanted man, Joaquin "Shorty" Guzman, the documents show. In 2001, Guzman escaped from a maximum security prison in a laundry cart.

HSBC closed the suspected accounts, but the bank kept accepting dollar deposits in Sinaloa. Between 2006 and 2008, HSBC's Mexican unit moved $1.1 billion from Sinaloa to the bank's U.S. branches, according to the documents.

Drug cartels earn an estimated $60 billion a year from trafficking in the United States, according to the United Nations. Half of that money is routed back to Mexico to pay off politicians, fund private arsenals and fuel violence that killed more than 60,000 people over the past six years.

Loretta Lynch, the U.S. Attorney in Brooklyn, said that compliance at HSBC was "woefully inadequate."

HSBC's compliance employees were vastly outnumbered, according to prosecutors. Less than a handful of bank employees, for example, were charged with reviewing 13,000 to 15,000 suspicious alerts generated monthly, they said.

FIXING PROBLEMS

Prosecutors agreed to a deferred prosecution deal, which means that HSBC avoids being criminally charged. They also decided against charging any individuals.

Lanny Breuer, chief of the Justice Department's criminal division, defended the move, saying, "HSBC is paying a heavy price for its conduct."

Later, he said that while HSBC permitted itself to be an essential element in money laundering, it was not the mastermind. "They are not the Sinaloa cartel," he said.

HSBC said it had increased spending on anti-money laundering systems by about nine times between 2009 and 2011, exited business relationships and clawed back bonuses for senior executives. As evidence of its determination to change, it cited the hiring last January of Stuart Levey, a former top U.S. Treasury Department official, as chief legal officer.

Under the five-year agreement with the Justice Department, HSBC has agreed to have an independent monitor evaluate its progress in improving its compliance.

It also said that as part of the overhaul of its controls, it has launched a global review of its "Know Your Customer" files, which will cost an estimated $700 million over five years. The files are designed to ensure that banks do not unwittingly act as conduits for criminal funds.

There is already some evidence that the crackdown on HSBC has slowed the flow of illegal cash.

In 2009, HSBC began exiting a business that moves bulk cash through the global financial system and a year later, the Office of the Comptroller of the Currency ordered the bank to improve its compliance.

Since then, the repatriation of U.S. dollars from Mexico has fallen to less than $5 billion in 2011 compared with $12 billion in 2008, according to Donald Semesky, a former Drug Enforcement Administration official who provided the data last month at an anti-money laundering conference in Washington.

(Additional reporting by Aruna Viswanatha in Washington, Jessica Dye in New York, Brett Wolf and Steve Slater in London and Lawrence White and Michael Flaherty in Hong Kong; Editing by Eddie Evans, Paritosh Bansal and Ken Wills)

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World Briefing | Asia: Chinese Leader Offers Policy Hints

The state news media confirmed Monday that Xi Jinping, the new Communist Party chief, visited Guangdong Province over the weekend, a trip first reported by Hong Kong news organizations. Mr. Xi chose Guangdong and the special economic zone of Shenzhen for his first tour outside of Beijing as party chief, signaling that he might favor more market-oriented economic policies. Xinhua, the state news agency, reported Monday that Mr. Xi met with business executives in Guangzhou and talked about tax reform, support for exports, aid for small businesses and land use. “We need both a firm confidence in victory and a stronger sense of peril,” he said, and added that officials should carry out “deeper reform,” improve the mechanisms of the market economic system and strengthen the “rule of law.”

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Massive HP conference draws 10,000 attendees to ogle products, speakers, presentations

By Suzy Hansen

More than 10,000 customers, partners and attendees flocked to the Hewlett-Packard Discover conference in Frankfurt, Germany, this week to learn about HP’s latest products, exchange ideas, swap business cards and basically examine whether HP can improve the way their companies are run. The event was held at Messe Frankfurt, one of the world’s largest trade exhibition sites.

CEO Meg Whitman acknowledged in her speech on Tuesday that HP has gone through some rough times this past year. HP’s stock price has been nearly halved during her tenure. Whitman, however, pointed out that HP has $ 120 billion in revenue and is the 10th-largest company in the United States. In Q4, HP has generated $ 4.1 billion in cash flow.

“We are the No. 1 or No. 2 provider in almost every market,” Whitman told the crowd in Frankfurt.

Whitman emphasized  executives’ increasing concerns about security and said that it will be addressed by “a new approach”: HP’s security portfolio, with Autonomy and Vertica, which helps “analyze and understand the context of these events.” Executive Vice President of Enterprise Dave Donatelli spoke about converged infrastructure, or bringing together server, network and storage; their software-defined data centers; and their new servers, which “change the way servers have been defined.” George Kadifa, executive vice president of software, said 94 of the top 100 companies use HP software. HP is the sixth-largest software company in the world, with 16,000 employees in 70 countries, Kadifa added.

Also at the conference was Jeffrey Katzenberg, CEO of DreamWorks and an old friend of Whitman’s from their Disney days, who roused the crowd with a fun speech about his long relationship with HP. Katzenberg showed an old video of himself onstage with a lion, which nearly mauled him. This time, he appeared onstage with a guy in a lion suit. The lesson was to learn from past mistakes and move on.

“If I am smart enough to say ‘scalable multicorps processing,’ I am smart enough to not put myself onstage with a real lion again,” he joked.

The Discover conference is a key vehicle for HP to show off products it’s offering in the coming year. Among them were the latest ProLiant and Integrity servers, the 3PAR StoreServ 7000 and the StoreAll and StoreOnce storage systems. At the HP Labs section of the conference, attendees could learn about the cloud infrastructure or test HP’s new ElitePad 900.

Throughout the three-day event, which saw attendance grow by 30 percent this year, attendees wandered the enormous halls, milling around displays, watching videos, listening to speeches and participating in workshops. People gathered on clustered couches and chatted with new acquaintances, frequently stopping to plug in their various devices and recharge themselves with coffee. With people coming from all over the world, you could hear many languages spoken, from Arabic to French to the most bewildering of them all: the language of technology. Despite the large crowds, it was hard not to notice there were very few women among the thousands in attendance. In fact, when asked about this phenomenon, one female HP employee said, “Trust me, you aren’t the first person who has come up to me asking about this.”

Indeed, the Discover conference was like a forest of men in suits. The few women stood out like rays of sunlight. 

Regardless of their presence at this conference, women are making big strides in information technology. Among the leaders are HP CEO Whitman, who also led eBay; Carly Fiorina, who ran HP before Whitman; Yahoo! CEO Marissa Mayer; and Facebook COO Sheryl Sandberg. Were the women at the Discover conference surprised by the low female turnout?

“No, for IT this is standard,” said Stefanie, a 30-year-old product manager from Germany. “Many are afraid of all the technical stuff, and you have to prove that you are capable of it. You get more women in retail and distribution but not in high-tech areas, at least not in Europe. In America there are more women in management positions and in general.”

Americans might assume that Europe, with its generous social programs that include free daycare, enables more women to ascend the corporate ladder. But that still doesn’t mean that a woman trying to balance a high-tech career and a family is always accepted in European society.

“There is still a lot of emphasis on the family,” Stefanie said. “It’s easier to move up in the U.S., where there is a culture of ‘having it all.’ It’s quite a fight to get there here.”

Still, the IT industry might seem inhospitable to women. Could this male-dominated profession be male-dominant because women have a hard time breaking in?

Stefanie disagreed. “No, they actually like working with women,” she said. “They want to.”

One male conference attendee, who asked not to be named, was less certain.

“There’s a lot of ego and testosterone,” he said. “It can’t be easy” for women.

Tech News Headlines – Yahoo! News

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Hayden Panettiere Splits with Scotty McKnight

12/10/2012 at 07:50 PM EST

Hayden Panettiere and Scotty McKnight

Splash News Online

Is there a tear in her beer?

Nashville star Hayden Panettiere has broken up with her boyfriend of more than a year, New York Jets wide receiver Scotty McKnight, a source confirms to PEOPLE.

But the split doesn't appear to be the stuff of a sad country song. The actress, 23, is still friends with McKnight, 24, and one source tells TMZ that their pals wouldn't be surprised if they got back together.

This is Panettiere's second go at a relationship with an athlete. Before dating McKnight she was with Ukrainian boxer Wladimir Klitschko for about two years.
– Julie Jordan

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Surprise: New insurance fee in health overhaul law

WASHINGTON (AP) — Your medical plan is facing an unexpected expense, so you probably are, too. It's a new, $63-per-head fee to cushion the cost of covering people with pre-existing conditions under President Barack Obama's health care overhaul.

The charge, buried in a recent regulation, works out to tens of millions of dollars for the largest companies, employers say. Most of that is likely to be passed on to workers.

Employee benefits lawyer Chantel Sheaks calls it a "sleeper issue" with significant financial consequences, particularly for large employers.

"Especially at a time when we are facing economic uncertainty, (companies will) be hit with a multi-million dollar assessment without getting anything back for it," said Sheaks, a principal at Buck Consultants, a Xerox subsidiary.

Based on figures provided in the regulation, employer and individual health plans covering an estimated 190 million Americans could owe the per-person fee.

The Obama administration says it is a temporary assessment levied for three years starting in 2014, designed to raise $25 billion. It starts at $63 and then declines.

Most of the money will go into a fund administered by the Health and Human Services Department. It will be used to cushion health insurance companies from the initial hard-to-predict costs of covering uninsured people with medical problems. Under the law, insurers will be forbidden from turning away the sick as of Jan. 1, 2014.

The program "is intended to help millions of Americans purchase affordable health insurance, reduce unreimbursed usage of hospital and other medical facilities by the uninsured and thereby lower medical expenses and premiums for all," the Obama administration says in the regulation. An accompanying media fact sheet issued Nov. 30 referred to "contributions" without detailing the total cost and scope of the program.

Of the total pot, $5 billion will go directly to the U.S. Treasury, apparently to offset the cost of shoring up employer-sponsored coverage for early retirees.

The $25 billion fee is part of a bigger package of taxes and fees to finance Obama's expansion of coverage to the uninsured. It all comes to about $700 billion over 10 years, and includes higher Medicare taxes effective this Jan. 1 on individuals making more than $200,000 per year or couples making more than $250,000. People above those threshold amounts also face an additional 3.8 percent tax on their investment income.

But the insurance fee had been overlooked as employers focused on other costs in the law, including fines for medium and large firms that don't provide coverage.

"This kind of came out of the blue and was a surprisingly large amount," said Gretchen Young, senior vice president for health policy at the ERISA Industry Committee, a group that represents large employers on benefits issues.

Word started getting out in the spring, said Young, but hard cost estimates surfaced only recently with the new regulation. It set the per capita rate at $5.25 per month, which works out to $63 a year.

America's Health Insurance Plans, the major industry trade group for health insurers, says the fund is an important program that will help stabilize the market and mitigate cost increases for consumers as the changes in Obama's law take effect.

But employers already offering coverage to their workers don't see why they have to pony up for the stabilization fund, which mainly helps the individual insurance market. The redistribution puts the biggest companies on the hook for tens of millions of dollars.

"It just adds on to everything else that is expected to increase health care costs," said economist Paul Fronstin of the nonprofit Employee Benefit Research Institute.

The fee will be assessed on all "major medical" insurance plans, including those provided by employers and those purchased individually by consumers. Large employers will owe the fee directly. That's because major companies usually pay upfront for most of the health care costs of their employees. It may not be apparent to workers, but the insurance company they deal with is basically an agent administering the plan for their employer.

The fee will total $12 billion in 2014, $8 billion in 2015 and $5 billion in 2016. That means the per-head assessment would be smaller each year, around $40 in 2015 instead of $63.

It will phase out completely in 2017 — unless Congress, with lawmakers searching everywhere for revenue to reduce federal deficits — decides to extend it.

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Wall Street gets small lift from technology and McDonald's

NEW YORK (Reuters) - Stocks edged higher on Monday as technology shares bounced back after recent weakness and McDonald's posted strong monthly sales.

Technology stocks were led by Hewlett-Packard Co , which climbed 2.6 percent to $14.16 on rumors that activist investor Carl Icahn is building a stake in the PC maker. The stock is down 44.5 percent for the year and ranks as the Dow's worst performer. The S&P technology index <.gspt> was up 0.3 percent.

Tech also was supported by Cisco Systems , which gained 2.4 percent to $19.79 after the company presented its midterm growth strategy on Friday.

McDonald's Corp gave the Dow a jolt, gaining 1.1 percent to $89.41, as its November sales were stronger than expected and showed a bounce back from a decline in October.

There was little news Monday about the negotiations over the "fiscal cliff," a series of automatic tax hikes and spending cuts that could hurt economic growth next year. Concerns that lawmakers will not broker a deal have kept a lid on optimism in the equity market.

"There is a general sense that if a deal is struck, that we could have a further advance in the market at the end of this year as well as the first part of next year," said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

A breakout to the upside on a cliff deal could take the S&P 500 back up to 1,474, just off the 2012 high for the index, said Elliot Spar, Stifel Nicolaus option market strategist in Shrewsbury, New Jersey.

The benchmark S&P 500 index has yet to see a move greater than 0.5 percent in either direction on any day in December, and hasn't moved more than 1 percent either way in any session since November 23. However, the market has regained most of the losses incurred post-election as investors refocused on the fiscal cliff.

U.S. President Barack Obama met with Republican House Speaker John Boehner on Sunday to negotiate a budget deal. A Boehner aide said Monday that talks are continuing.

The Dow Jones industrial average <.dji> rose 14.75 points, or 0.11 percent, to 13,169.88 at the close. The Standard & Poor's 500 Index <.spx> inched up just 0.48 of a point, or 0.03 percent, to 1,418.55. The Nasdaq Composite Index <.ixic> advanced 8.92 points, or 0.30 percent, to close at 2,986.96.

News out of Italy kept sentiment in check as Prime Minister Mario Monti said he would resign after the approval of the 2013 budget. The move added to uncertainty about progress being made to tackle the euro zone's debt problem and drove Italy's borrowing costs higher.

U.S.-listed shares of Nexen jumped 13.8 percent to $26.77 and the stock was the second-most actively traded on the New York Stock Exchange. On Friday, Canada approved a $15.1 billion bid by CNOOC Ltd for energy company Nexen.

The S&P materials index <.gspm> gained 0.7 percent and led the S&P 500's sector index gains as shares of mining companies rose in sync with copper and gold prices. Shares of Freeport-McMoRan gained 1.1 percent to $32.04.

Volume was roughly 5.3 billion shares traded on the NYSE, the Nasdaq and the NYSE MKT, compared with the year-to-date average daily closing volume of roughly 6.5 billion.

Advancers outnumbered decliners on the NYSE by a ratio of about 17 to 13, while on the Nasdaq, seven stocks rose for every five that fell.

(Reporting by Caroline Valetkevitch; Additional reporting by Doris Frankel in Chicago and Gabriel Debenedetti in New York; Editing by Jan Paschal)

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Sunni Muslim and Alawite Militias Clash in Lebanon

Omar Ibrahim/Reuters

Lebanese gunmen fired in Tripoli as bodies arrived from Syria.

TRIPOLI, Lebanon — Clashes between Sunni Muslim and Alawite militias have killed at least 17 people here recently in perhaps the worst spillover of violence from the civil war in neighboring Syria.

Tripoli, which is Lebanon’s second-largest city and is close to the northern border with Syria, has long been the scene of conflict between Sunni Muslims in the city’s Bab al-Tabbaneh neighborhood and Alawites in the hilltop section of Jabal Mohsen, with each group maintaining militias.

But during the 21-month conflict in Syria, the web of religious and family ties and fault lines between the two countries has created new strains, especially in Tripoli. Lebanese Sunnis have increasingly supported and even joined the Sunni-led uprising against President Bashar al-Assad of Syria, who is Alawite and whose sect dominates the government. Refugees from both sects have flowed into the city.

As some Tripoli residents begin to see themselves as part of the Syrian conflict — to the dismay of the Lebanese government, which fears being dragged into the war — the intensity and frequency of fighting has increased dramatically, with clashes sometimes ignited by events in Syria. Scores have been killed here this year.

The latest conflict began after a number of Sunni fighters from northern Lebanon were killed in an ambush by pro-government forces as they tried to enter Syria to join opposition fighters. Sunnis in Tripoli, angry over videos that purported to show the men’s bodies being stabbed and kicked, attacked Alawites, starting days of clashes between militias wielding rifles and rocket-propelled grenades. Lebanese news media put the death toll at 17.

Lebanon is divided over Syria, with the parliamentary opposition bloc fiercely opposed to Mr. Assad, and as the Syrian conflict has become more sectarian, so has the Lebanese debate. Many Shiites and Alawites support Mr. Assad and fear that Syria’s Sunni majority will take revenge against minorities, while many Lebanese Sunnis, emboldened by the uprising, have struck an aggressive posture toward a government they see as dominated by the Syria-backed Islamist party Hezbollah and weakened by Mr. Assad’s troubles.

Sunni fighters from northern Lebanon, including the Bab al-Tabbaneh neighborhood, now routinely cross into Syria to fight. Many link up with Islamist factions like Jabhet al-Nusra, a group that the United States is considering declaring a terrorist organization.

Militia leaders in Bab al-Tabbaneh say they frown on their men going to Syria because it leaves them short-handed for any conflict at home. But it is hard to stop fighters who feel a personal connection to the civil war.

Some of the young men from Bab al-Tabbaneh showed up as corpses in videos circulated on cellphones by rebel supporters. One video showed bodies being repeatedly stabbed with knives. In another, men shouted insults as they kicked and stomped on corpses’ heads.

A Sunni militia commander in Bab al-Tabbaneh who goes by the name Abu Bera identified one of the men as his friend Hussein Sorour, a 24-year-old baker and fighter.

Even during a lull in fighting on Saturday, snipers atop the hill of Jabal Mohsen made streets in Bab al-Tabbaneh unsafe. People traversed the neighborhood by passing through a maze of holes knocked out of walls and crossing alleys with huge tarps strung up to obstruct the view of snipers. One young boy walked down an alley carrying a Kalashnikov assault rifle. He said he was 11.

There is a fear that the clashes could spread to other parts of Tripoli. Violence has touched the affluent and usually quiet city center. Rockets and mortars have hit the area more than a dozen times over the past week, said Racha el-Halabi, 19, a university student and journalist.

“It’s the first time ever,” she said. “Everyone is worried.”

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Tim McGraw and Faith Hill Kick Off Special Series of Las Vegas Shows

By Mark Gray

12/09/2012 at 05:00 PM EST

Tim McGraw and Faith Hill

Denise Truscello/WireImage

Tim McGraw and Faith Hill looked at each other, their hands on each others knees and shared a passionate kiss just after midnight Sunday morning.

The moment was a long time coming – it capped off their first weekend as a Las Vegas headlining act.

Earlier in the 90 minute show, McGraw told the crowd at the Venetian that he and his wife were going to "have fun tonight" and it genuinely seemed like they did, singing with each other for several songs while still letting the other perform their solo hits. Though the show – called the Soul2Soul series – is technically not the same "residency" show Las Vegas is known for, the couple will perform for 10 weekends through April.

At a press conference several months ago, McGraw and Hill promised a "personal" show, and they delivered in a big way. In fact, it got very personal as McGraw complimented his wife on her flowing black dress, saying, "It's gonna look good on the floor later."

The duo also took a moment to sit down and speak with the crowd. Though they didn't field any questions, they spoke about the most common questions they get asked. "We always get asked what was the music we heard first, who influenced us," Hill said.

Rather than answer it, the duo then sing a few of their main influences – Hill sang George Strait; McGraw sang The Eagles.

"I love doing other people's music, better than my own," McGraw joked.

With few bells and whistles, the show puts the focus squarely on it's two superstars, and considering the rousing ovations McGraw and Hill received Saturday, that's perfectly fine with their fans.

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Smokers celebrate as Wash. legalizes marijuana

SEATTLE (AP) — The crowds of happy people lighting joints under Seattle's Space Needle early Thursday morning with nary a police officer in sight bespoke the new reality: Marijuana is legal under Washington state law.

Hundreds gathered at Seattle Center for a New Year's Eve-style countdown to 12 a.m., when the legalization measure passed by voters last month took effect. When the clock struck, they cheered and sparked up in unison.

A few dozen people gathered on a sidewalk outside the north Seattle headquarters of the annual Hempfest celebration and did the same, offering joints to reporters and blowing smoke into television news cameras.

"I feel like a kid in a candy store!" shouted Hempfest volunteer Darby Hageman. "It's all becoming real now!"

Washington and Colorado became the first states to vote to decriminalize and regulate the possession of an ounce or less of marijuana by adults over 21. Both measures call for setting up state licensing schemes for pot growers, processors and retail stores. Colorado's law is set to take effect by Jan. 5.

Technically, Washington's new marijuana law still forbids smoking pot in public, which remains punishable by a fine, like drinking in public. But pot fans wanted a party, and Seattle police weren't about to write them any tickets.

In another sweeping change for Washington, Gov. Chris Gregoire on Wednesday signed into law a measure that legalizes same-sex marriage. The state joins several others that allow gay and lesbian couples to wed.

The mood was festive in Seattle as dozens of gay and lesbian couples got in line to pick up marriage licenses at the King County auditor's office early Thursday.

King County and Thurston County announced they would open their auditors' offices shortly after midnight Wednesday to accommodate those who wanted to be among the first to get their licenses.

Kelly Middleton and her partner Amanda Dollente got in line at 4 p.m. Wednesday.

Hours later, as the line grew, volunteers distributed roses and a group of men and women serenaded the waiting line to the tune of "Chapel of Love."

Because the state has a three-day waiting period, the earliest that weddings can take place is Sunday.

In dealing with marijuana, the Seattle Police Department told its 1,300 officers on Wednesday, just before legalization took hold, that until further notice they shall not issue citations for public marijuana use.

Officers will be advising people not to smoke in public, police spokesman Jonah Spangenthal-Lee wrote on the SPD Blotter. "The police department believes that, under state law, you may responsibly get baked, order some pizzas and enjoy a 'Lord of the Rings' marathon in the privacy of your own home, if you want to."

He offered a catchy new directive referring to the film "The Big Lebowski," popular with many marijuana fans: "The Dude abides, and says 'take it inside!'"

"This is a big day because all our lives we've been living under the iron curtain of prohibition," said Hempfest director Vivian McPeak. "The whole world sees that prohibition just took a body blow."

Washington's new law decriminalizes possession of up to an ounce for those over 21, but for now selling marijuana remains illegal. I-502 gives the state a year to come up with a system of state-licensed growers, processors and retail stores, with the marijuana taxed 25 percent at each stage. Analysts have estimated that a legal pot market could bring Washington hundreds of millions of dollars a year in new tax revenue for schools, health care and basic government functions.

But marijuana remains illegal under federal law. That means federal agents can still arrest people for it, and it's banned from federal properties, including military bases and national parks.

The Justice Department has not said whether it will sue to try to block the regulatory schemes in Washington and Colorado from taking effect.

"The department's responsibility to enforce the Controlled Substances Act remains unchanged," said a statement issued Wednesday by the Seattle U.S. attorney's office. "Neither states nor the executive branch can nullify a statute passed by Congress."

The legal question is whether the establishment of a regulated marijuana market would "frustrate the purpose" of the federal pot prohibition, and many constitutional law scholars say it very likely would.

That leaves the political question of whether the administration wants to try to block the regulatory system, even though it would remain legal to possess up to an ounce of marijuana.

Alison Holcomb is the drug policy director of the American Civil Liberties Union of Washington and served as the campaign manager for New Approach Washington, which led the legalization drive. She said the voters clearly showed they're done with marijuana prohibition.

"New Approach Washington sponsors and the ACLU look forward to working with state and federal officials and to ensure the law is fully and fairly implemented," she said.

___

Johnson can be reached at https://twitter.com/GeneAPseattle

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Asian shares firm as China, U.S. data brighten outlook

SINGAPORE (Reuters) - Asian shares clambered to a 16-month high on Monday as investors took heart from economic data from China and the United States that raised hopes about the outlook for growth in the world's top two economies.

The euro was under pressure, having been knocked by the prospect of a recession in Germany and political uncertainty in Italy after Prime Minister Mario Monti, an investors' favorite, said at the weekend he intended to resign early.

MSCI's broadest index of Asia Pacific shares outside Japan <.miapj0000pus> and Tokyo's Nikkei share average <.n225> both gained 0.3 percent. <.t/>

The MSCI index rose more than 1 percent last week, its third successive weekly gain, taking it to levels not seen since early August 2011, and there was a further boost for regional markets on Sunday when China reported a pick-up in factory output and retail sales growth to eight-month highs.

"We had some really good economic data coming out from China," said Juliana Roadley, market analyst at Commonwealth Securities. "Over the last few years, you had the Chinese government pulling back on growth and trying to control things so that it didn't over-boil. Now it looks like all that good work has been done."

Hopes that China's economy is revving up again after seven straight quarters of slowing growth also boosted riskier assets such as oil and copper.

Asian "risk" markets took in their stride China trade data on Monday that showed both imports and exports below forecasts.

"The export slowdown shows external demand faces uncertainty due to concerns over the fiscal cliff in the US," Zhang Zhiwei, chief China economist at Nomura in Hong Kong, said. "Nonetheless it does not change our view that growth is on track for a strong recovery in Q4, as (growth) is mostly domestically driven."

On Wall Street, the Dow <.dji> and S&P 500 <.spx> had risen modestly on Friday after an unexpected fall in the U.S. unemployment rate. S&P 500 futures were up 0.1 percent on Monday. <.n/>

MARKETS WATCH ITALY

The euro slid in early trading towards a two-week low of $1.2876 plumbed on Friday, before popping back above $1.29. Investors had sold the euro after Germany's central bank on Friday warned that the euro zone's biggest economy could soon enter recession.

Italian Prime Minister Monti's surprise announcement at the weekend came a few days after former Prime Minister Silvio Berlusconi abruptly withdrew support for Monti's technocrat government, formed over a year ago in an effort to restore Italy's credibility with investors.

"If Monti's pro-euro stance is to back off, that should raise concerns about the euro," said Junya Tanase, chief currency strategist at JPMorgan Chase in Tokyo.

Italian bond yields will be closely watched on Monday. The 10-year yield, the main barometer of investor confidence, stood at 4.5 percent at the end of last week, 323 basis points higher than the yield on the lower risk German equivalent but well below the 7.3 percent peak hit last year, when the spread over German Bunds hit 550 points.

The U.S. dollar rose about 0.3 percent against a basket of major currencies <.dxy>.

Commodity markets were also generally firmer, with copper, which draws strength from expectations of Chinese industrial demand, rising 0.2 percent to around $8,050 a metric ton (1.1023 tons) and oil rising around 0.3 percent.

Brent crude trade around $107.40 a barrel and U.S. crude fetched about $86.20.

"Investors are slightly more optimistic about China's economic recovery than before and that is supportive for oil," said Ken Hasegawa, a commodity sales manager at Newedge Japan.

The easy outlook for monetary policy continued to support gold, with the U.S. Federal Reserve expected to signal this week it will continue to pump money into the economy in 2013. Also, there was talk of a possible rate cut next year by the European Central Bank.

Spot gold firmed 0.1 percent to around $1,705 an ounce.

(Additional reporting by Thuy Ong in Sydney and Manash Goswami in Singapore; Editing by Richard Borsuk)

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