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HSBC to pay $1.9 billion fine in money laundering case

posted 11 Dec 2012, 04:48 by Mpelembe Admin   [ updated 11 Dec 2012, 04:49 ]

IG Markets analyst says HSBC Holdings Plc has set aside substantial funds to pay 1.92 billion U.S. dollars to settle a multi-year U.S. criminal probe into money-laundering lapses at the British lender, the largest penalty ever paid by a bank.

LONDONUNITED KINGDOM  (REUTERS) - HSBC Holdings Plc has agreed to pay $1.92 billion to settle a multi-year U.S. criminal probe into money-laundering lapses at the British lender, the largest penalty ever paid by a bank.

HSBC admitted to a breakdown of controls and apologised in a statement on Tuesday (December 11) announcing it had reached a deferred-prosecution agreement with the U.S. Department of Justice, as was first reported by Reuters last week.

IG Markets analyst Alastair Mccaig said HSBC had already set aside $1.5 billion to cover fines or penalties stemming from the inquiry and warned costs could be significantly higher.

"They were aware of what potentially might be around the corner... the company have already looked to start to deal with this by talking about cost-cutting measures of cutting about 2.5 to 3.5 billion in costs and also asset stripping as well. So I think as far as the fiscal issues are concerned it is coverable," he said.

Mccaig said HSBC's reputation had been dented and might take a while to recover.

"I think reputationally speaking though this might take a bit of time to get that reputation back," he said.

HSBC said it would pay $1.921 billion, continue to cooperate fully with regulatory and law enforcement authorities and take further action to strengthen its compliance policies and procedures. U.S. prosecutors have agreed to defer or forgo prosecution.

The deferred prosecution agreement, when detailed by U.S. Justice Department officials later on Tuesday, could yield new information about a failure at HSBC to police transactions linked to Mexico, sources familiar with the matter said. Details of those dealings were reported this summer in a sweeping U.S. Senate probe.

HSBC's settlement also includes agreements or consent orders with the Manhattan district attorney, the Federal Reserve and three U.S. Treasury Department units: the Office of Foreign Assets Control, theComptroller of the Currency and the Financial Crimes Enforcement Network.

The settlement is the third time in a decade that HSBC has been penalised for lax controls and ordered by U.S. authorities to better monitor suspicious transactions.

U.S. and European banks have now agreed to settlements with U.S. regulators totalling some 5 billion U.S. dollars in recent years on charges they violated U.S. sanctions and failed to police illicit transactions.

No bank or bank executives, however, have been indicted as prosecutors have instead utilised deferred prosecutions.

HSBC shares fell slightly in early London trading to 6.40 pounds. The bank's Hong Kong listed stock nudged up 0.3 percent to 79.70 Hong Kong dollars.


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