Tags: HSBC | bank | fine | money | laundering

HSBC to Pay at Least $1.9 Billion in Money-Laundering

Monday, 10 Dec 2012 05:07 PM

HSBC Holdings Plc will pay at least $1.9 billion to settle U.S. probes of money laundering allegations involving Europe’s largest bank, a person familiar with the matter said, making it the largest such accord ever.

The bank, whose top executives were accused of lax oversight by a U.S. Senate subcommittee in July, has been the target of investigations run by the U.S. Department of Justice, the Treasury Department’s Office of Foreign Asset Controls, the Federal Reserve, the Office of the Comptroller of the Currency and the Manhattan District Attorney.

The agreement is set to be announced Tuesday, said the person, who asked not to be identified because the matter isn’t public. Earlier Monday, Standard Chartered Plc, Britain’s second-largest bank by market value, agreed to pay $327 million in fines after regulators alleged it violated U.S. sanctions with Iran.

HSBC Chief Executive Officer Stuart Gulliver’s attempts to reduce costs and improve profitability at the bank have been hurt by the U.S. probes and compensation claims from U.K. clients. The Senate committee said that failures in HSBC’s money-laundering controls allowed terrorists and drug cartels access to the U.S. financial system.

Robert Sherman, a spokesman for London-based HSBC, declined to comment on the settlement. The bank had earlier said that it was cooperating with the various investigations.

Additional Provision

HSBC made an additional $800 million provision in the third quarter to cover a potential settlement, adding to $700 million it had already earmarked. The bank said on Nov. 5 it will probably face charges as part of U.S. anti-money-laundering probes and the cost of a settlement may “significantly” exceed the $1.5 billion the bank has set aside.

Gulliver, who became CEO in January 2011, is seeking to cut costs by $2.5 billion to $3.5 billion and revive profit by selling assets to focus on those emerging economies in which the bank has a greater market share. The savings may exceed that range and be met by the end of 2013, HSBC said last month.

London-based Standard Chartered, after agreeing in August to a $340 million settlement with New York’s Department of Financial Services, told investors on Dec. 6 it expected to pay about $330 million to resolve other investigations.

The bank will pay $100 million to the Federal Reserve and $227 million to the U.S. Department of Justice and the Manhattan District Attorney. The settlement includes a $132 million fine to the Treasury Department’s Office of Foreign Assets Control, according to a statement from the Federal Reserve today.

In Talks

HSBC has been in talks with U.S. regulators over allegations it laundered funds of sanctioned nations including Iran and Sudan. The probes prompted Standard & Poor’s to question whether the lender, Europe’s largest by market value, is too big to be managed effectively.

The settlement would also surpass the $619 million in penalties paid in June by ING Groep NV, the biggest Dutch financial-services company.

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HSBC Holdings, Europe's biggest bank, will pay at least $1.9 billion to settle U.S. probes of money laundering allegations, a person familiar with the matter said, making it the largest such accord ever.

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