HSBC to pay US$1.9bn in probe

MONEY MULES::A US Senate investigation found that HSBC Mexico had sent US$7 billion in what looked like illegal drugs proceeds to the US

AP, WASHINGTON

Wed, Dec 12, 2012 - Page 15

HSBC, the British banking giant, said yesterday it will pay US$1.9 billion to settle a money laundering probe by federal and state authorities in the US.

The probe of the bank — Europe’s largest by market value — has focused on the transfer of billions of dollars on behalf of nations like Iran, which are under international sanctions, and the transfer of money through the US financial system from Mexican drug cartels.

Stuart Gulliver, group chief executive of HSBC, released a statement yesterday saying: “We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again.”

A US law enforcement official said on Monday that HSBC will pay US$1.25 billion in forfeiture and pay US$655 million in civil penalties.

The US$1.25 billion figure is the largest forfeiture ever in a case involving a bank. Under what is known as a deferred prosecution agreement, the financial institution will be accused of violating the Bank Secrecy Act and the Trading With the Enemy Act.

The official spoke on condition of anonymity because the source was not authorized to speak about the matter on the record.

Under the deferred prosecution arrangement, HSBC will admit to certain misconduct, the official said, but the details of those admissions to be made in a New York court were not immediately available on Monday.

Nevertheless, the deferred prosecution agreement means the bank will not be prosecuted further if it meets certain conditions, such as strengthening its internal controls to prevent money laundering.

The Justice Department has used such arrangements often in cases involving large corporations, notably in settlements of foreign bribery charges.

In regard to HSBC and Mexico, a US Senate investigative committee reported that in 2007 and 2008 HSBC Mexico sent around US$7 billion in cash to the US.

The committee report said that large an amount of cash indicated illegal drug proceeds.

Money laundering by banks has become a priority target for US law enforcement.

In another case on Monday, a British bank, Standard Chartered, which was accused of scheming with the Iranian government to launder billions of dollars, signed an agreement with New York regulators to settle their investigation with a US$340 million payment.

Since 2009, Credit Suisse, Barclays, Lloyds and ING all paid settlements related to allegations that they moved money for people or companies that were on the US sanctions list.

In his statement yesterday, HSBC’s Gulliver said: “The HSBC of today is a fundamentally different organization from the one that made those mistakes. 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.”

HSBC announced on Monday that Robert Werner, a former head of the US Treasury Department agencies responsible for sanctions against terrorist financing and money laundering, is taking a new position within HSBC as head of group financial crime compliance and group money-laundering reporting officer. Werner has been head of global standards assurance since August.

In January, HSBC hired Stuart Levey, a former Treasury undersecretary for terrorism and financial intelligence, as its chief legal officer. And a former policy adviser in the Obama administration, Preeta Bansal, in October became HSBC’s global general counsel for litigation and regulatory affairs.