In a major victory for prosecutors, the British bank will today admit to breaking laws by transferring billions from drug cartels and terrorists through the US financial system.
The sum – an unprecedented fine for this activity – comes above previous expectations of $1.5bn, although the bank’s chief executive Stuart Gulliver warned last month that the fee could be “substantially higher” than that.
The settlement is believed to have been made with the US Justice Department, the US Treasury and Manhattan’s District Attorney. As well as the fine, HSBC is expected to admit to breaking two US laws – the Bank Secrecy Act, which requires financial institutions to prevent money laundering, and the Trading with the Enemy Act, designed to restrict trade with countries deemed hostile, such as Iran.
The $1.9bn hit is reportedly made up of a $1.3bn deferred prosecution agreement, which will see HSBC avoid any criminal prosecution, as well as a $650m civil fine.
It follows the bank admitting to lax financial controls during the summer, following a Senate investigation which found that HSBC allowed suspect transactions between the US and Mexico.
Yesterday it appointed Bob Werner, a former head of the US Treasury’s Office of Foreign Assets Control department, to a new role as head of financial crime compliance.
A HSBC spokesman said last night: “As we have previously disclosed in financial filings, we are cooperating with authorities in ongoing investigations. The nature of any conversations is confidential.”
Yesterday, Standard Chartered doubled the amount it was paying out to authorities after it broke sanctions in place against Iran, Burma, Sudan and Libya.
The British bank agreed to pay an additional $327m to the same three departments, taking its total fine to $667m.
An investigation found that the vast majority of Standard Chartered’s 60,000 payments related to Iran from 2001 to 2007, totalling $250bn, were not illegal. But $24m of the transactions, as well as $109m on behalf of Burmese, Sudanese and Libyan entities, did break the rules.