HSBC said today it will pay a fine of $1.92 billion (€1.48 billion) in a deferred prosecution agreement with the US department of justice over the London-based bank's inadequate compliance with anti-money laundering laws.
HSBC admitted to a breakdown of controls and apologised in a statement announcing it had reached a deferred-prosecution agreement with the US authorities.
"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organisation from the one that made those mistakes," said chief executive Stuart Gulliver.
"Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters."
The bank said it expected to also reach a settlement with the Financial Services Authority in Britain.
US and European banks have now agreed to settlements with US regulators totalling some $5 billion (€3.87 billion) in recent years on charges they violated US sanctions and failed to police illicit transactions.
No bank or bank executives, however, have been indicted as prosecutors have instead utilized deferred prosecutions.
HSBC said it would pay $1.921 billion, continue to co-operate fully with regulatory and law enforcement authorities and take further action to strengthen its compliance policies and procedures. US prosecutors have agreed to defer or forgo prosecution.
Last month, HSBC told investors it had set aside $1.5 billion to cover fines or penalties stemming from the inquiry and warned costs could be significantly higher.
Analyst Jim Antos of Mizuho Securities said the statement today indicates an extra $420 million for the settlement costs, calling it a "trivial" figure in terms of the company's book value. "But in terms of real cash terms, that's a huge fine to pay," said Mr Antos.
US justice department officials are expected to detail the settlement later today.
HSBC's settlement is the latest chapter in an embarrassing period for the bank, the result of a lengthy investigation into Europe's biggest bank by US law enforcement agencies as well as a US senate panel that in July issued a scathing review of HSBC.
Reuters