HSBC and Standard Chartered, the two biggest UK banks by market value, have agreed to pay almost $2.6 billion in fines as part of record settlements with US authorities over money laundering allegations.

HSBC will spend $700 million on a global programme to “know your customer”, as part of a humbling 26-point plan agreed with US regulators following a $1.9 billion settlement over money laundering and sanctions breaches.

The British bank, which signed up to an A-Z programme of management changes covering both its US and global operations, reiterated apologies for its failure to prevent Mexican money launderers and Middle East terrorists from using its network. “We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again,” said chief executive Stuart Gulliver, as he attempted to draw a line under what investors saw as the biggest threat to the bank and its share price.

HSBC signed a five-year deferred prosecution agreement to prevent a trial over the affair and paid $1.256 billion to the department of justice and a further $665 million in fines to US regulators. The department said at least $881 million in drug-trafficking proceeds from Mexican and Colombian drug cartels were laundered through HSBC in the US. The bank was also accused of helping countries evade sanctions, with $660 million from Iran, Cuba, Sudan, Libya and Burma sent to HSBC accounts in the US.

HSBC Group became aware in 2000 that sanctioned countries’ names were being stripped from payment transfers, with notes attached such as “do not mention Iran”, the department said, echoing similar action taken against Standard Chartered which has just finalised a $667 million settlement with six regulators. – Copyright The Financial Times Limited 2012