HSBC Pays Record Fine To Settle US Money-Laundering Accusations


HSBC is to pay a record $1.9bn (£1.2bn) to settle allegations that it laundered money for drug cartels and broke sanctions in the US to allow terrorists to move money around the financial system.

In the latest embarrassment for Britain’s banks, the HSBC chief executive, Stuart Gulliver, said he was “profoundly sorry” as he confirmed the scale of the fine. It is the largest ever for such an offence and even greater than the £940m the bank had feared it faced after the allegations first surfaced in the summer in a report by the US Senate.

“We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again,” he said, insisting Britain’s biggest bank was “a fundamentally different organisation” now.

The fine for HSBC comes barely 24 hours after Standard Chartered paid £415m to US regulators, and as banks such as Royal Bank of Scotland and UBS brace for a wave of fines in coming days for attempting to rig Libor following the £290m penalty slapped on Barclays in June.

Gulliver was promoted to chief executive two years ago during a management reshuffle caused by the decision by Lord Green, the chairman, to quit to join the government as a trade minister.

A spokesman for the Department of Business, Innovation and Skills, which Green represents, said: “The report by the US Senate sub-committee sets out in detail the evidence submitted to it and the action taken by HSBC to ensure compliance with US regulations at the time that Lord Green was group chairman. At the time of the report’s publication HSBC expressed its regret that there were failures of implementation and Lord Green has said that he shares that regret.”

David Bagley, the bank’s head of compliance, dramatically quit before the US Senate committee hearing into the case in July and on Monday HSBC named a former US official – Bob Werner – as head of group financial crime compliance, a newly created role, as the bank prepared for the fine related to drug allegations.

The penalty includes a five-year agreement with the US department of justice under which the bank will install an independent monitor who will assess the bank’s changed internal controls. The bank’s top executives will defer part of their bonuses for the whole of the five-year period, while bonuses have been clawed back from a number of former and current executives, including those in the US directly involved at the time.

HSBC has managed to avoid being criminally prosecuted – a move that could have stopped the bank operating in the US at all.

HSBC’s share price rose by 2.8p to 644p despite the size of the fine. Ian Gordon, banks analyst at Investec, said the fine was slightly lower than the $2bn he had been pencilling in to his forecasts. But, he said: “HSBC’s settlement with the US authorities will include a deferred prosecution agreement with the department of justice of five years’ duration. Given HSBC’s ongoing US business and other continuing conduct investigations, this sword of Damocles is not without teeth, albeit based on what we know, we are regarding the $1.921bn settlement as de facto ‘final’.”

Gulliver stressed that the bank had co-operated with the US authorities. “Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters,” he said.

“We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world,” he added.

The US Senate said the bank had operated a “pervasively polluted” culture that lasted for years, allowing HSBC to move billions around the financial system for Mexican drug lords, terrorists and governments on sanctions lists. HSBC’s Mexican operations moved $7bn into the US operations, for instance, which the Senate was told was tied to drug money.

HSBC said it also expected to finalise an “undertaking” with its home regulator, the Financial Services Authority, “shortly”.

The bank has also spent $290m on improving its systems to try to avoid a re-run of the events. © 2012 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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David Taintor is a news editor at Talking Points Memo. Previously, he worked at NBC News and Adweek. He's a native of Minnesota. Reach him at