HSBC might pay $1.8 bn money laundering fine: sources

Dec 06 2012, 10:52 IST
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HSBC Holdings might pay a fine of $1.8 billion as part of a settlement with US law-enforcement agencies.  (Reuters) HSBC Holdings might pay a fine of $1.8 billion as part of a settlement with US law-enforcement agencies. (Reuters)
SummaryHSBC Holdings might pay a fine of $1.8 billion as part of a settlement with US law-enforcement agencies.

HSBC Holdings Plc might pay a fine of $1.8 billion as part of a settlement with U.S. law-enforcement agencies over money-laundering lapses, according to several people familiar with the matter.

The settlement with Europe's biggest bank - which could be announced as soon as next week - will likely involve HSBC entering into a deferred prosecution agreement with federal prosecutors, said the sources, who spoke on condition of anonymity.

The potential settlement, which has been in the works for months, is emerging as a test case for just how big a signal U.S. prosecutors want to send to try to halt illicit flows of money moving through U.S. Banks.

An HSBC spokesman said: "We are cooperating with authorities in ongoing investigations. The nature of discussions is confidential."

HSBC said on Nov. 5 that it set aside $1.5 billion to cover a potential fine for breaching anti-money laundering controls in Mexico and other violations, although Chief Executive Stuart Gulliver said the cost could be "significantly higher."

In regulatory filings, HSBC has said it could face criminal charges. But similar U.S. investigations have culminated in deferred prosecution deals, where law- enforcement agencies delay or forgo prosecuting a company if it admits wrongdoing, pays a fine and agrees to clean up its compliance systems.

If the company missteps again, the Justice Department could prosecute. A deferred prosecution agreement could raise questions over whether HSBC is simply paying a big fine and nothing more, said Jimmy Gurule, a former enforcement official at the U.S. Treasury.

It would make a "mockery of the criminal justice system," said Gurule, who is now a University of Notre Dame law-school professor.

In his view, the only way to really catch the attention of banks is to indict individuals.

"That would send a shockwave through the international finance services community," Gurule said. "It would put the fear of God in bank officials that knowingly disregard the law."

An HSBC settlement, long rumored, has been slow in coming. Inside the Justice Department, prosecutors in Washington, D.C. and West Virginia argued over how to best investigate HSBC.

According to documents reviewed by Reuters, the U.S. Attorney's office in Wheeling, West Virginia, was prepared as far back as 2010 to indict HSBC and include more than 170 money laundering counts.

Prosecutors in Washington ultimately took charge. In June, the U.S. Senate Permanent Subcommittee on Investigations released a report saying HSBC allowed

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