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HSBC to Pay Record $1.9 billion U.S. Fine in Money Laundering Case

11 Dec 2012

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HSBC Holdings Plc


(Reuters)

HSBC Holdings Plc has agreed to pay $1.92 billion (1.19 billion pounds) to settle a multi-year U.S. criminal probe into money-laundering lapses at the British lender, the largest penalty ever paid by a bank.
HSBC admitted to a breakdown of controls and apologised in a statement on Tuesday announcing it had reached a deferred-prosecution agreement with the U.S. Department of Justice, as was first reported by Reuters last week.

"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, reports  Reuters.
U.S. and European banks have now agreed to settlements with U.S. regulators totalling some $5 billion in recent years on charges they violated U.S. sanctions and failed to police illicit transactions.
No bank or bank executives, however, have been indicted as prosecutors have instead utilized deferred prosecutions.

The deferred prosecution agreement, when detailed by U.S. Justice Department officials later on Tuesday, could yield new information about a failure at HSBC to police transactions linked to Mexico, sources familiar with the matter said. Details of those dealings were reported this summer in a sweeping U.S. Senate probe.
HSBC's settlement also includes agreements or consent orders with the Manhattan district attorney, the Federal Reserve and three U.S. Treasury Department units: the Office of Foreign Assets Control, the Comptroller of the Currency and the Financial Crimes Enforcement Network.

HSBC said it would pay $1.921 billion, continue to cooperate fully with regulatory and law enforcement authorities and take further action to strengthen its compliance policies and procedures. U.S. prosecutors have agreed to defer or forgo prosecution.
The settlement is the third time in a decade that HSBC has been penalized for lax controls and ordered by U.S. authorities to better monitor suspicious transactions. Directives by regulators to improve oversight came in 2003 and again in 2010.
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 on Tuesday 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".

HSBC shares fell slightly in early London trading to 6.40 pounds. The bank's Hong Kong listed stock nudged up 0.3 percent to HK$79.70.
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 U.S. law enforcement agencies as well as a U.S. Senate panel that in July issued a scathing review of HSBC.

Tags: Business, Nigeria, Featured, HSBC, U.S, Money

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