HSBC to pay $1.9B fine to settle probe
Largest penalty for a bank accused of money laundering
LONDON — HSBC, Europe’s largest bank by market value, agreed Tuesday to pay $1.9 billion U.S. to settle a U.S. money-laundering probe. It is the biggest penalty ever imposed on a bank after facing accusations it transferred funds through the U.S. from Mexican drug cartels and on behalf of nations such as Iran that are under international sanctions.
“We accept responsibility for our past mistakes,” said HSBC chief executive Stuart Gulliver. “We have said we are profoundly sorry for them, and we do so again.”
It’s the latest scandal to hit banks since the financial crisis started in 2008. Hours earlier, Standard Chartered PLC, another British bank, signed an agreement with New York regulators to settle a money-laundering investigation involving Iran with a $340 million payment.
“These banks are operating in an environment where you can’t afford to have uncertainty attached to your name, and they are dependent on confidence from their investors,” said Sabine Bauer, director of financial institutions at Fitch Ratings. “And that makes them keen to get past such events very quickly and settle.”
Analysts said the two Britainbased banks will be able to absorb the cost of the settlements.
According to Shore Capital analyst Gary Greenwood, the penalties are equivalent to nine per cent of each company’s 2012 pre-tax profits.
“The certainty is clearly welcome and helps to draw a line under the situation,” said Greenwood.
Banks are facing greater scrutiny since the financial crisis. A string of banking scandals has highlighted lax oversight and a culture of arrogance and entitlement.
Money laundering by banks has become a priority target for U.S. law enforcement. Since 2009, Credit Suisse, Barclays, Lloyds, and ING have all paid big settlements related to allegations that they moved money for people or companies that were on the U.S. sanctions list.