HSBC to pay $1.92bn fine for money-laundering

HBSC will fork out more than $1billion for a settlement in a money-laundering case in the US.

HBSC will fork out more than $1billion for a settlement in a money-laundering case in the US.

UNITED STATES - HSBC on Tuesday agreed to pay a record $1.92 billion fine to settle a multi-year probe by US prosecutors, who accused Europe's biggest bank of failing to enforce rules designed to prevent the laundering of criminal cash.

The US Justice Department on Tuesday charged the bank with failing to maintain an effective programme against money laundering and conduct due diligence on certain accounts.

In documents filed in federal court in Brooklyn, it also charged the bank with violating sanction laws by doing business with Iran, Libya, Sudan, Burma and Cuba.

HSBC Holdings Plc admitted to a breakdown of controls and apologised for its conduct.

Speaking to Talk Radio 702/567 Cape Talk's Bruce Whitfield, analyst Ian Gordon said this would be a historic payment.

"The activities extended over a long period and I struggle to think of a similar example where we have seen such an extended period of wrongdoing."

There was also the possibility that HSBC would have been banned from doing business in the US if it chose to fight the charges.

"It needs to have a US domestic licence for domestic business."

The bank agreed to forfeit $1.256 billion.

It will also retain a compliance monitor to resolve the charges through a deferred-prosecution agreement.

The settlement offers new information about failures at HSBC to police transactions linked to Mexico, details of which were reported this summer in a sweeping U.S. Senate probe.

No bank or bank executives, however, have been indicted, as prosecutors have instead used deferred prosecutions - under which criminal charges against a firm are set aside if it agrees to conditions such as paying fines and changing behaviour.

"Certainly the expectation is that the settlement will not lead to any action against any executives. There is some speculation on whether some bonuses will be tied to the prosecution agreement."

HSBC's settlement also includes agreements or consent orders with the Manhattan district attorney, the Federal Reserve and three U.S. Treasury Department units.

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 forego prosecution.

The settlement is the third time in a decade that HSBC has been penalised 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 that costs could be significantly higher.