HSBC facing US fines of $1bn over lax control of accounts
HSBC WILL apologise to US politicians next week for failing to have appropriate controls in place to ensure it did not facilitate the financing of terrorism and other criminal activities, transgressions that analysts estimate may cost it up to $1 billion in fines.
In an internal memo to staff ahead of the British bank’s scheduled appearance in front of the US senate’s investigative panel on July 17th, chief executive Stuart Gulliver wrote: “Between 2004 and 2010, our anti-money-laundering controls should have been stronger and more effective, and we failed to spot and deal with unacceptable behaviour.”
He said it was “right that we be held accountable and that we take responsibility for fixing what went wrong”.
His comments came a week after Bob Diamond was forced to resign as chief executive of Barclays after the bank was hit with a record fine for rigging borrowing rates. Both Mr Diamond and Marcus Agius, the outgoing chairman, have apologised for the behaviour of those involved.
Mr Gulliver warned that HSBC was likely to face further enforcement action from other US authorities over the coming months. HSBC said in its 2011 annual report that fines over money-laundering issues could be “significant”.
There has been speculation among analysts that the bank could be hit with a higher charge than the $619 million which ING, the Dutch bank, agreed to pay to settle accusations that it violated US sanctions by helping Iranian and Cuban companies move billions of dollars through the US financial system.
Some have suggested it could be as much as $1 billion.
The hearing next week – likely to be attended by Irene Dorner, chief executive of HSBC’s North American business, and at least one other senior executive – comes after the bank was ordered to overhaul its internal controls in the US.
In 2010, an investigation by the Federal Reserve and the office of the comptroller of the currency found there was “a significant potential for unreported money-laundering or terrorist financing”.
HSBC is expected to provide details of the changes it has made to strengthen its compliance and risk-management controls.
Mr Gulliver told staff in the memo that the bank had doubled the amount it was spending on compliance to $400 million and restructured its global operations.
The HSBC has suffered a particularly tumultuous period in the US following its rapid expansion there in the years leading up to the financial crisis. – (Copyright The Financial Times Limited 2012)