HSBC has agreed to make a total of $1.92 billion to settle a US criminal investigation over breaches of anti-money laundering and sanctions laws, said to be the biggest penalty ever paid by a bank for such transgressions.

HSBC has agreed to make a total payment of $1.92 billion to settle a US criminal investigation over breaches of anti-money laundering and sanctions laws, said to be the biggest penalty ever paid by a bank for such transgressions.

It has been speculated for weeks that the UK/Hong Kong-listed banking firm was to make such a settlement to deal with the matter. The offences date back to 2003. As well as reaching an agreement with the US authorities, the bank said it expects to complete an agreement with the UK financial watchdog soon.

“HSBC has reached agreement with US authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws,” the bank said in a statement on its website. “HSBC has also reached agreement to achieve a global resolution with all other US government agencies that have investigated HSBC's past conduct related to these issues and anticipates finalising an undertaking with the UK Financial Services Authority shortly,” it said.

The bank said it will “continue to cooperate fully with regulatory and law enforcement authorities, and take further action to strengthen its compliance policies and procedures”.

"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organisation from the one that made those mistakes. 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,” Stuart Gulliver, HSBC’s chief executive, said in the statement.

Decisive action

The bank said that in recent years, HSBC has taken “decisive action to direct management to fix past shortcomings as they have come to light”.

“Since 2011, with new senior leadership teams in place at both HSBC Group and HSBC North America, HSBC has taken extensive and concerted steps to put in place the highest standards for the future,” it said, arguing that the US Department of Justice has acknowledged these efforts in the agreement.

As part of the five-year term of the agreement with the Department of Justice, an independent monitor will evaluate HSBC's progress in fully implementing various measures and regularly check to see if HSBC’s compliance systems are working as planned.

Miscreants

As pointed out by Reuters, US and European banks have now agreed to settlements with US regulators totalling around $5 billion in recent years on charges they violated US sanctions and failed to police illicit transactions.

In November, HSBC said it had set aside $1.5 billion to cover fines or penalties stemming from the inquiry, warning that the actual cost could be even heavier.

Yesterday, Standard Chartered agreed a $327 million settlement with US authorities for rules violations relating to a period between 2001 and 2007, according to a statement on that UK-listed bank’s website.

“The settlements are the product of an extensive internal investigation that led the bank voluntarily to report its findings concerning past sanctions compliance to these US authorities, and nearly three years of intensive cooperation with regulators and prosecutors,” the Standard Chartered statement said.

“Under the terms of the OFAC Settlement Agreement, the Deferred Prosecution Agreements with the Department of Justice and the District Attorney’s Office, and the Cease & Desist Order and Order of Assessment of a Civil Money Penalty with the Federal Reserve, no further action will be taken against Standard Chartered by these authorities if it meets the conditions set out in the agreements,” it said.

Other banks reaching settlements over sanctions breaches have included Credit Suisse, Lloyds Banking Group and Barclays and ABN AMRO Holding. JP Morgan, Wachovia and Citigroup have been cited for anti-money laundering lapses or sanctions violations, Reuters reported.