HomeWorld BusinessHSBC to pay record $1,9bn fine in money laundering case

HSBC to pay record $1,9bn fine in money laundering case


NEW YORK – HSBC Holdings Plc has agreed to pay $1,92 billion to settle a multi-year United States criminal probe into money-laundering lapses at the British lender, the largest penalty ever paid by a bank.

Report by Reuters

HSBC admitted to a breakdown of controls and apologised in a statement announcing it had reached a deferred-prosecution agreement with the US Department of Justice.

“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 organisation from the one that made those mistakes,” said chief executive Stuart Gulliver.

“Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters.”

The bank said it expected to also reach a settlement with British watchdog the Financial Services Authority.

US and European banks have now agreed to settlements with US regulators totalling some $5 billion in recent years on charges they violated US sanctions and failed to police illicit transactions.

No bank or bank executives, however, have been indicted as prosecutors have instead utilised deferred prosecutions.

HSBC said it would pay $1,921 billion, continue to co-operate fully with regulatory and law enforcement authorities and take further action to strengthen its compliance policies and procedures.

US prosecutors have agreed to defer or forgo prosecution.

Last month, HSBC told investors it had set aside $1,5 billion to cover fines or penalties stemming from the inquiry and warned costs could be significantly higher.

Analyst Jim Antos of Mizuho Securities said the statement yesterday indicates an extra $420 million for the settlement costs, calling it a “trivial” figure in terms of the company’s book value. “But in terms of real cash terms, that’s a huge fine to pay,” said Antos, who rates HSBC a “buy”.

Hong Kong listed shares of HSBC nudged up slightly yesterday, adding 25 cents to HK$79,75.

US Justice Department officials were expected to detail the settlement late yesterday.

HSBC’s settlement is the latest chapter in an embarrassing period for the bank, the result of a lengthy probe into Europe’s biggest bank by US law enforcement agencies as well as a US Senate panel that in July issued a scathing review of HSBC.

In its statement, HSBC said it had increased spending on anti-money laundering systems, exited business relationships and clawed back bonuses for senior executives. It also cited the hiring last January of Stuart Levey, a former top US Treasury Department official, as chief legal officer.

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

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