HSBC is expected to pay more than $1.5bn (£933m) in fines to US authorities within weeks to settle money-laundering investigations into its business.
The bank could be fined the sum as early as next week as part of a settlementwith federal prosecutors, according to reports yesterday.
HSBC has put aside $1.5bn to meet the cost of the fines, but admitted at its latest results presentation that the eventual penalty could be “significantly higher” and that it could face criminal charges. Yesterday’s reports put the likely size of the fine at$1.8bn. HSBC declined to comment.
The fines relate to an investigation of HSBC’s US and Mexican operations that found the bank had allegedly ignored warningsthat billions of dollars of funds being moved between the two subsidiaries were linked to drug trafficking.
A Senate committee described the bank as “pervasively polluted for a long time”. It highlighted what it said were lax controls and inadequate compliance by staff as the bank was accused of handling transactions involving terrorists, drug lords and rogue regimes.
David Bagley, HSBC’s global head of compliance, resigned over the scandal, while Stuart Gulliver, the bank’s chief executive, apologised for “the mistakesof the past”.
A settlement would likely involve the US Department of Justice agreeing a deal whereby HSBC paid a largefine, but in return would have the prospect of a further criminal action dropped so long as it reformed compliance systems.
But there is no certainty of this type of settlement. Announcing its third-quarter results last month, HSBC said: “While the prosecution of corporate criminal charges in these types of cases has most often been deferred through an agreement withthe relevant authorities, theUS authorities have substantial discretion, and prior settlements can provide no assurance as to how the US authorities will proceed in these matters.”
A fine of $1.8bn would be one of the biggest financial penalties imposed on a British bank, but would notprevent HSBC from reporting a profit for 2012.
The bank is in the process of radically restructuring itsUS operations and is preparing to sell down some of the more than$40bn of toxic US debt it still holds on its books morethan four years on from thefinancial crisis.
