Money Laundering: Banking giant's shame: HSBC to pay record £1.2bn for helping Mexican drug cartels launder money

Carl Levin

British banking giant HSBC will pay £1.2billion ($1.9billion) to settle a money-laundering probe by federal and state authorities in the United States, a law enforcement official said on Monday.

The probe of the bank - Europe’s largest by market value - has focused on the transfer of billions of dollars on behalf of nations like Iran and North Korea, which are under international sanctions, and the transfer of money through the U.S. financial system from Mexican drug cartels.

According to the official, HSBC will pay £777million ($1.25billion) in forfeiture and pay £407million ($655million) in civil penalties.

The £777million figure is the largest forfeiture ever in a case involving a bank.

Under what is known as a deferred prosecution agreement, the financial institution will be accused of violating the Bank Secrecy Act and the Trading With The Enemy Act.

The London-based bank said it is cooperating with investigations but that those discussions are confidential.

Last month it announced it had set aside £933million ($1.5billion) to cover the costs of any settlement or fines.

The deal could be announced as early as today, the Wall Street Journal reports.

It follows the announcement of a similar but much smaller settlement with UK-based Standard Chartered bank, which will pay £186million ($300million) in fines for violating US sanction rules.

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

In regard to HSBC and Mexico, a U.S. Senate investigative committee reported that in 2007 and 2008 HSBC Mexico sent to the United States about $7 billion (£4.3billion) in cash.

The committee report said that amount of cash indicated illegal drug proceeds.

The deferred prosecution agreement means the bank will not be prosecuted further if it meets certain conditions, such as strengthening its internal controls to prevent money laundering.

The U.S. Justice Department has used such arrangements often in cases involving large corporations, notably in settlements of foreign bribery charges.

Money laundering by banks has become a priority target for U.S. law enforcement.

Since 2009, Credit Suisse, Barclays and Lloyds have all paid settlements related to allegations that they moved money for people or companies on the U.S. sanctions list.

Last summer, the Senate investigation concluded that HSBC's lax controls exposed it to money laundering and terrorist financing.

HSBC bank affiliates also skirted U.S. government bans against financial transactions with Iran and other countries, according to the report from the Senate Permanent Subcommittee on Investigations.

The report also said HSBC's U.S. division provided money and banking services to some banks in Saudi Arabia and Bangladesh thought to have helped fund al Qaida and other terrorist groups.

The report also blamed U.S. regulators, saying they knew the bank had a poor system to detect problems but failed to take action.

Senator Carl Levin, the committee chairman, cited instances in which HSBC promised to fix deficiencies after being sanctioned by regulators but failed to follow up.

Mr Levin also said the Office of the Comptroller of the Currency - the U.S. agency that oversees the biggest banks - tolerated HSBC's weak controls against money laundering for years and that agency examiners who raised concerns were overruled by their superiors.

Culled from dailymail.co.uk