HSBC Holdings PLC (NYSE:HBC) might pay a fine of $1.8 billion in a settlement with U.S. law enforcement over money-laundering, Reuters reported Wednesday night, citing 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 deal 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 strong a signal prosecutors want to send against 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 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.”
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In regulatory filings, HSBC has admitted that 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, Jimmy Gurule, a former enforcement official at the U.S. Treasury, told Reuters.
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."