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Europe’s largest banking business by market capitalisation, HSBC Holdings plc (LSE:HSBA), has agreed to settle the biggest anti-money laundering penalty in history for a bank, the company announced earlier today.
In a statement, HSBC stated it is to pay US$1.92 billion (£1.2 billion) to authorities in the United States and is close to “finalising an undertaking” with the UK’s Financial Services Authority.
HSBC has been under investigation over violations of anti-money laundering and bank secrecy laws by different government agencies in the United States, including the US Senate, which launched its own inquiry as the matter involved funds alleged to be used by drug traffickers and groups affiliated with terrorist organisations.
The settlement was over US$400 million more than what HSBC set aside to cover the cost of perceived penalties, totaling up to US$1.5 billion. The bank spared US$700 million back in June and another US$800 million during the third quarter of this year.
Yesterday, Standard Chartered plc (LSE:STAN) was ordered to pay a fine of US$327 million to US authorities, including the Office of Foreign Control, the Federal Bank of New York, the New York Country District Attorney’s Office, and the US DOJ in connection with violations of sanction laws and breaches in compliance and transparency linked to transactions with entities from Iran, Sudan, Libya, and Burma.
The Senate Subcommittee under Homeland Security & Governmental Affairs, in July 2012, stated HSBC “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls.”
Accepting Responsibility
Stuart Gulliver, Group Chief Executive, spoke on behalf of the global banking giant, accepting responsibility for “our past mistakes”.
“We have said we are profoundly sorry for them, and we do so again,” he said, adding that the bank is now a different entity than the one that erred in the past.
Beyond the settlement, HSBC will continue to cooperate with regulatory and law enforcement authorities, and take further action to strengthen its compliance policies and procedures, it said.
HSBC and the US Department of Justice also signed a Deferred Prosecution Agreement, which will allow the USDOJ to evaluate HSBC’s implementation of the bank’s overhaul of its structures, controls, and procedures.
As part of the agreement, HSBC said it has elevated the role of a Group Compliance Officer to oversee the global compliance across all of its financial arms.
HSBC operates in 6,900 offices in 84 countries providing retail banking, wealth management, commercial banking, and private banking activities.
In London, shares dropped 0.3% to 639.40 pence at 10 AM GMT, following the announcement. Shares are also listed on stock exchanges in Hong Kong, New York, Paris, and Bermuda.
