HSBC to Pay Record Money Laundering Penalty

HSBC to Pay Record Money Laundering Penalty

Multiple outlets are reporting that HSBC Holdings PLC has reached a $1.9 billion settlement with U.S. authorities.

The U.K.-based banking company is expected to forfeit nearly $1.3 billion as part of a deferred prosecution agreement, the largest-ever U.S. forfeiture for a bank, and a civil fine of more than $650 million. Key violations include breaches of the Bank Secrecy Act, and the Trading with the Enemy Act.

The investigation began when Immigration and Customs Enforcement agents began looking at suspicious cash flows involving HSBC branches in Mexico and the U.S.

Problems with lax financial controls at HSBC emerged during 2010 when the Office of the Comptroller of the Currency issued a cease-and-desist order citing deficient monitoring of bulk-cash purchases and international funds transfers, and other issues.

A report by the Senate Permanent Subcommittee on Investigations stated that the bank did not follow standard AML best practices. For example, the Mexico bank had a branch in the Cayman Islands that had no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.

The bank has since introduced stringent "know your customer" standards, a standard AML tactic, intended to avoid doing business with suspicious parties.

The settlement would resolve a number of investigations, including those by the U.S. Justice Department, U.S. Treasury and other federal agencies.


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