The latest compliance issues in wealth management in North America.

HSBC
HSBC confirmed today that it will pay $765 million to settle the Justice Department's claims that it willfully covered up risks associated with residential-mortgage products ahead of the 2008 financial crisis. The bank had initially flagged that a settlement of this size was in the offing when it issued interim financial results a few weeks ago.

The UK/Hong Kong-listed lender told this publication that it had reached the settlement.

According to various media reports (Wall Street Journal, CitiAM, other) between 2005 and 2007, the bank placed defective mortgages into residential mortgage-backed securities that it created and sold, according to claims by the US Justice Department this week.

Prosecutors claim that HSBC's bankers overlooked mortgages in the securities that were likely to default and failed to tell investors about the risks.

“We are pleased to put this investigation related to activity that occurred more than a decade ago behind us,” Patrick J Burke, president and chief executive, HSBC USA, said in a statement emailed to this news service.

“Since the financial crisis, HSBC has been strengthening our culture, processes and internal controls to ensure fair outcomes for our clients. The US management team is focused on putting historical matters into the rear view mirror and completing the turnaround of HSBC’s US operations," Burke added.

In paying the civil penalty, HSBC joins the ranks of other lenders settling with the DoJ about how banks dealt in mortgage-backed securities. In August, Wells Fargo said it would pay $2.09 billion to settle similar claims. Other banks settling claims include Barclays, Royal Bank of Scotland, JP Morgan and Bank of America.