Home Business HSBC to pay $1.9 billion fine for money laundering

HSBC to pay $1.9 billion fine for money laundering

HSBC is to pay US authorities $1.9 billion in a settlement over money laundering, the largest paid in such a case, the bank has confirmed.

A US Senate investigation said the UK-based bank had been a conduit for “drug kingpins and rogue nations”.

Money laundering is the process of disguising the proceeds of crime so that the money cannot be linked to the wrongdoing.

HSBC admitted having poor money laundering controls and apologized.

“We accept responsibility for our past mistakes,” said HSBC group chief executive Stuart Gulliver in a statement.

“We have said we are profoundly sorry for them, and we do so again.”

The bank said it had spent $290 million on improving its systems to prevent money laundering and clawed back some bonuses paid to senior executives in the past.

It also said it expected to reach an agreement with the UK’s Financial Services Authority shortly.

Last month it announced it had set aside $1.5 billion to cover the costs of any settlement or fines.

HSBC is to pay US authorities $1.9 billion in a settlement over money laundering

HSBC is to pay US authorities $1.9 billion in a settlement over money laundering

The news followed the announcement of a similar but much smaller settlement with UK-based Standard Chartered bank, which will pay $300 million in fines for violating US sanctions.

The cases are seen as part of a crackdown on money laundering and sanctions violations being led by federal government agencies and New York state authorities.

The settlement had been widely expected following a report by the US Senate, published earlier this year, that was heavily critical of HSBC’s money laundering controls.

The report alleged that:

  • HSBC      in the US had not treated its Mexican affiliate as high risk, despite the      country’s money laundering and drug trafficking challenges
  • The      Mexican bank had transported $7 billion in US bank notes to HSBC in the      US, more than any other Mexican bank, but had not considered that to be      suspicious
  • It      had circumvented US safeguards designed to block transactions involving      terrorists drug lords and rogue states, including allowing 25,000      transactions over seven years without disclosing their links to Iran
  • Providing      US dollars and banking services to some banks in Saudi Arabia despite      their links to terrorist financing
  • In      less than four years it had cleared $290 million in “obviously      suspicious” US travellers’ cheques for a Japanese bank, benefiting      Russians who claimed to be in the used car business

The report suggested HSBC accounts in Mexico and the US were being used by drug barons to launder money.

“The banks became very overextended, not just in lending on property, which we all know about, but in this case, for example, buying businesses in Mexico about which, it turned out, they knew too little,” said Sir John Gieve, former deputy governor of the Bank of England.

The Senate report also said HSBC regularly circumvented restrictions on dealings with Iran, North Korea, and other states subject to US sanctions.

HSBC has announced it has appointed a former US official to work as its head of financial crime compliance, which is a new position.

Bob Werner was previously the head of the US Treasury’s Office of Foreign Assets Control (OFAC) – the agency responsible for enforcing the US sanctions on countries including Iran.

He will be responsible for beefing up HSBC’s anti-money laundering and sanctions compliance systems.

It is unclear what impact the case will have on HSBC’s business. The bank is the biggest in Europe by market capitalization, and made pre-tax profits of $12.7 billion for the first six months of 2012.

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Diane is a perfectionist. She enjoys searching the internet for the hottest events from around the world and writing an article about it. The details matter to her, so she makes sure the information is easy to read and understand. She likes traveling and history, especially ancient history. Being a very sociable person she has a blast having barbeque with family and friends.
  • My husband and I have had accounts with both HSBC Singapore and HSBC Jakarta. The bank and it’s employees are the lowest of the low and feel they can treat anyone and anyone’s money as their own.

    HSBC Singapore was suppose to do a very important transfer for us and neglected to do so and then over a 4 day period no one from the back was reachable via email concerning the transfer. Seems the upper management had decided to leave and take holidays and left a secretary in charge who never answered emails.

    HSBC Jakarta, was worse, my husband transferred 10,000 USD from our USD account to our Idnonesian Rupiah account with all accounts being in HSBC Jakarta. He had paperwork proving this and for some reason some HSBC idiot reversed the transaction and we did not know until creditors were contacting us about overdue things that were supposed to be paid for with the transferred funds. HSBC Jakarta refused to discuss the issue with us and only said “Sorry” and that was it. We had had an account with them at the time for over 7 years and they could careless about it. We kept following up about it and we could not get answers that int he end instead of HSBC answering about their poroblem they told us their level of service was not up to the level that we expected and we were asked to move over 500,000 USD to another bank.

    HSBC get’s what they deserve due to their dishonesty and arrogance.