British financial giant HSBC Holdings PLC has agreed to pay more than US$100 million to US authorities after admitting to defrauding clients during multibillion-dollar foreign-exchange transactions, the US Department of Justice announced on Thursday.
The settlement follows an indictment handed down on Wednesday against a former Barclays PLC trader similarly accused of defrauding the former California computing giant Hewlett-Packard Co by manipulating foreign-exchange markets.
Under the terms of the agreement, which is under review by a federal judge in Brooklyn, HSBC is to pay a US$63.1 million fine and an additional US$38.4 million in restitution and disgorgement — or the return of ill-gotten gains, the Department of Justice said.
“HSBC’s admissions in connection with this resolution confirm that the company misused confidential client information for its own profit on more than one occasion,” the department’s criminal division acting head John Cronan said in a statement. “This sort of misconduct not only harmed their clients, costing the victims money, but it also ran a serious risk of undermining the public’s confidence in our financial markets.”
In 2010 and 2011, traders on HSBC’s foreign-exchange desk used confidential client information to conduct trades in British currency that deliberately drove the price of sterling in a direction benefitting the bank and harming the clients, prosecutors said, adding that US officials only identified one of the two clients: the Scotland-based oil and gas explorer Cairn Energy PLC.
HSBC has agreed to continue cooperating with investigators and foreign authorities in any related investigations, including cases brought against individuals, and to enhance its internal safeguards against misconduct.
HSBC received no leniency for voluntarily disclosing the matter, the Department of Justice said, adding that initially the bank’s cooperation with investigators was also “deficient in certain respects.”
However, HSBC soon “changed course” after prodding from the government, earning “substantial cooperation credit,” it said.
Thursday’s settlement comes barely a month after the lapse of a landmark five-year, US$1.9 billion deal between US authorities and HSBC in which the British lender avoided prosecution after admitting in 2012 to widespread money-laundering and sanctions violations.
In October last year, HSBC’s former head of foreign-exchange cash trading, Mark Johnson, was convicted of eight counts of conspiracy and one count of wire fraud after a four-week trial. He is due to be sentenced next month.
HSBC was one of six major US and European banks that were fined a total US$4.2 billion by global regulators in a November 2014 crackdown for attempted manipulation of the foreign-exchange market.
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