HSBC Budgeting For $1.5bn Money Laundering Settlement
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Europe’s largest bank is bracing itself for a settlement with US regulators which analysts say could top $2 billion and is likely to lead to criminal charges as well.
HSBC on Monday set aside a further $1.15 billion to cover potential US fines for breaches in anti-money laundering controls in its Mexican unit as well as to compensate UK customers for mis-selling payment protection insurance, dragging down profits for the third quarter of the year.
Of the $1.15 billion, $800 million is set aside in relation to the ongoing US investigations.
Europe’s largest bank is bracing itself for a settlement with US regulators which analysts say could top $2 billion and is likely to lead to criminal charges as well.
HSBC on Monday set aside a further $1.15 billion to cover potential US fines for breaches in anti-money laundering controls in its Mexican unit as well as to compensate UK customers for mis-selling payment protection insurance, dragging down profits for the third quarter of the year.
Of the $1.15 billion, $800 million is set aside in relation to the ongoing US investigations.
Related News: HSBC Accused of Money Laundering for Drug Cartels and Terrorist Groups
Related News: HSBC Fined $27.5m in Money Laundering Probe
Related News: HSBC Fined a Record £10.5m for Mis-Selling Bonds to Elderly
The UK bank had in July set aside $700 million in provisions, bringing the total to $1.5 billion but HSBC warned yesterday that “the final amount of financial penalties could be higher, possibly significantly higher, than the amount accrued.”
The bank said it is also likely to face criminal charges in the money laundering case.
According to Reuters, any settlement with US prosecutors is likely to come in the form of a deferred prosecution agreement, which would allow the company to avoid a formal indictment.
Deferred prosecutions have become an increasingly popular way for federal prosecutors to penalise companies without running the risk of forcing them out of business by indicting them, said Reuters.
However, HSBC said a deferred agreement was not certain as the US authorities have “substantial discretion” do what they want. Stuart Gulliver, Group Chief Executive, said in a statement:
[quote] We are actively engaged in discussions with US authorities to try to reach a resolution, but there is not yet an agreement. The US authorities have substantial discretion, and prior settlements can provide no assurance as to how the US authorities will proceed in these matters. [/quote]
“This is a live process and we are in the hands of the US authorities. The timetable is set by the US regulators, and any further comments we make could well prejudice our position. Today’s increased provision is based upon the discussions we have had with them since the half-year end,” he added.
The London-based bank has since apologised for its failures and said the issue was “shameful and embarrassing”.
“The report undoubtedly caused considerable reputational damage to HSBC. The extent to which that has resulted in loss of business is hard to measure, but it has undoubtedly damaged our brand,” Gulliver said.
Related Story: Why ‘Rogue’ UK Bankers Can’t Escape US Regulators
Related Story: Post-Libor – Why Bankers Now Face A Legitimacy Crisis: Simon Johnson
