HSBC Reported Facing $1.8B Money-Laundering Fine

 
on December 05 2012 9:22 PM
HSBC
HSBC logos are displayed inside an office tower in Hong Kong

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.”

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."

 

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