HSBC has agreed to pay a record $1.92 billion fine to settle a multi-year probe by U.S. prosecutors, who accused Europe’s biggest bank of failing to enforce rules designed to prevent the laundering of criminal cash.
The U.S. Justice Department on Tuesday charged the bank with failing to maintain an effective program against money laundering and conduct due diligence on certain accounts.
In documents filed in federal court in Brooklyn, it also charged the bank with violating sanctions laws by doing business with customers in Iran, Libya, Sudan, Burma and Cuba.
HSBC Holdings Plc admitted to a breakdown of controls and apologized for its conduct.
“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes,” said Chief Executive Stuart Gulliver.
In an agreement with the Justice Department, the bank will take steps to fix the problems, pay a fine of $1.256 billion, and retain a compliance monitor to resolve the charges through a deferred-prosecution agreement. Including penalties imposed by other agencies, the bank’s fines total $1.92 billion. HSBC also faces civil penalties, to be announced later Tuesday.
The settlement offers new information about failures at HSBC to police transactions linked to Mexico, details of which were reported this summer in a sweeping U.S. Senate probe.
Between 2006 and 2010, HSBC ignored money-laundering risks associated with certain Mexican customers and allowed at least $881 million in drug trafficking proceeds, including proceeds from the Sinaloa Cartel in Mexico and the Norte del Valle Cartel in Colombia, to be laundered through the bank, according to the Tuesday agreement.
Despite known risks of doing business in Mexico, the bank put Mexico in its lowest risk category, which excluded $670 billion in transactions from the monitoring systems.
“The HSBC settlement sends a powerful wakeup call to multinational banks about the consequences of disregarding their anti-money laundering obligations,” said Senator Carl Levin, who led the Senate inquiry.
HSBC said it expected to also reach a settlement with British watchdog the Financial Services Authority. The FSA declined to comment.
U.S. and European banks have now agreed to settlements with U.S. regulators total ling some $5 billion in recent years on charges they violated U.S. sanctions and failed to police potentially illicit transactions.
No bank or bank executives have been indicted. Instead, prosecutors have used deferred prosecutions, under which criminal charges against a firm are set aside if it agrees to conditions such as paying fines and changing its behavior.
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