HSBC has agreed to pay around $2m (£1.6m) to settle a civil fraud lawsuit in the US.
The lawsuit alleged the lender improperly attempted to get reimbursement from the federally backed US Small Business Administration (SBA) on bad loans it knew were based on fraudulent or potentially fraudulent information.
Under a startup loan programme, the SBA guarantees up to 50 per cent of the value of loans made to small businesses by bigger lenders, including HSBC.
A complaint made by the US government in federal court in New York detailed how HSBC sought reimbursement for 42 defaulted loans without revealing that borrowers may have submitted false information to the bank to obtain many of the loans.
The bank also withheld that it had included the borrowers on an internal list of fraudulent or potentially fraudulent loans. HSBC accepted responsibility for not telling the SBA the borrowers' information may have been false.
The case was initially brought by a whistleblower under the False Claims Act. The US government later intervened in the case.
HSBC has been contacted for comment.
In February, HSBC Holdings hit the headline for revealing it was being probed by the City watchdog over money laundering issues. Soon after, it said its profits had taken a 62 per cent hit as one-off costs (such as the disposal of its Brazil operations) ate into earnings and that it was slashing its bonus pool.