http://www.huffingtonpost.com/2012/12/10/hsbc-money-laundering_n_2272855.html
This may be the world's largest wrist slap.
British banking giant HSBC, Europe's biggest bank, is set to pay $1.9 billion to settle accusations that it didn't do enough to stop money laundering in its branches, the Wall Street Journal reported on Monday. According to the WSJ, the U.S. government could announce the deal as soon as Tuesday.
HSBC's fine would shatter records for criminal and civil penalties paid by a bank, according to the WSJ. But it would not be more than investors had already expected. The bank on November 5 said it was setting aside $1.5 billion to cover potential penalties and warned it might have to pay a "significantly higher" amount. Reuters reported last week that the bank would likely soon settle for $1.8 billion.
Investors may well cheer the actual number. HSBC stock, which fell slightly on Monday in London trading, has gained 4 percent since the bank's November 5 warning.
What's more, HSBC will enter a deferred-prosecution agreement, the WSJ reports, which is essentially probation: The company will admit to violating the Bank Secrecy Act and the Trading with the Enemy Act. It will get a stern warning and promise to clean up its act.
Such a deal would make a "mockery of the criminal justice system," former Treasury Department official Jimmy Gurule, now a University of Notre Dame law-school professor, told Reuters last week.
As for the penalty, it will amount to a little more than half of the $3.5 billion in pre-tax profits the bank earned in the third quarter of 2012. The bank earned $16.8 billion in net income in 2011.
In July, bank officials apologized to the U.S. Senate for their lax money-laundering controls, which allowed Mexican drug cartels to launder billions of dollars over a period of seven years, according to a Senate subcommittee report. The bank may also have been used to send money to Iran and to terrorist groups, according to the report.
A top U.S. regulator, the Office of the Comptroller of the Currency, also did little to push HSBC to fix money-laundering issues that had been a concern for many years, according to the Senate report.
And HSBC is not alone: British bank Standard Chartered on Monday was slapped with a $327 million fine in its own deferred-prosecution deal over its laundering practices. And U.S. banks such as JPMorgan Chase and Bank of America are also under scrutiny for their laundering-prevention practices.
This is not the end of HSBC's troubles in the U.S. The bank is also reportedly one of more than a dozen banks being investigated on charges that they manipulated the London interbank offered rate, or Libor, an interest rate that affects borrowing costs throughout the economy. HSBC also got into hot water with British regulators earlier this year over accusations of misleading consumers into buying insurance and hedging products.
HSBC To Pay $1.9 Billion To Resolve Allegations The Bank Ignored Possible Money Laundering: Report
By Mark Gongloff
Posted: 12/10/2012 4:22 pm EST | Updated: 12/10/2012 5:05 pm EST
British banking giant HSBC, Europe's biggest bank, is set to pay $1.9 billion to settle accusations that it didn't do enough to stop money laundering in its branches, the Wall Street Journal reported on Monday. According to the WSJ, the U.S. government could announce the deal as soon as Tuesday.
HSBC's fine would shatter records for criminal and civil penalties paid by a bank, according to the WSJ. But it would not be more than investors had already expected. The bank on November 5 said it was setting aside $1.5 billion to cover potential penalties and warned it might have to pay a "significantly higher" amount. Reuters reported last week that the bank would likely soon settle for $1.8 billion.
Investors may well cheer the actual number. HSBC stock, which fell slightly on Monday in London trading, has gained 4 percent since the bank's November 5 warning.
What's more, HSBC will enter a deferred-prosecution agreement, the WSJ reports, which is essentially probation: The company will admit to violating the Bank Secrecy Act and the Trading with the Enemy Act. It will get a stern warning and promise to clean up its act.
Such a deal would make a "mockery of the criminal justice system," former Treasury Department official Jimmy Gurule, now a University of Notre Dame law-school professor, told Reuters last week.
As for the penalty, it will amount to a little more than half of the $3.5 billion in pre-tax profits the bank earned in the third quarter of 2012. The bank earned $16.8 billion in net income in 2011.
In July, bank officials apologized to the U.S. Senate for their lax money-laundering controls, which allowed Mexican drug cartels to launder billions of dollars over a period of seven years, according to a Senate subcommittee report. The bank may also have been used to send money to Iran and to terrorist groups, according to the report.
A top U.S. regulator, the Office of the Comptroller of the Currency, also did little to push HSBC to fix money-laundering issues that had been a concern for many years, according to the Senate report.
And HSBC is not alone: British bank Standard Chartered on Monday was slapped with a $327 million fine in its own deferred-prosecution deal over its laundering practices. And U.S. banks such as JPMorgan Chase and Bank of America are also under scrutiny for their laundering-prevention practices.
This is not the end of HSBC's troubles in the U.S. The bank is also reportedly one of more than a dozen banks being investigated on charges that they manipulated the London interbank offered rate, or Libor, an interest rate that affects borrowing costs throughout the economy. HSBC also got into hot water with British regulators earlier this year over accusations of misleading consumers into buying insurance and hedging products.
