HSBC to announce $1.8 bln settlement in U.S. money laundering probe-sources

Tue Dec 11, 2012 12:38am EST

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Dec 11 (Reuters) - HSBC Holdings Plc is expected to become the first bank to admit to both money-laundering lapses and U.S. sanctions violations on Tuesday as part of a settlement of around $1.8 billion with law enforcement agencies, according to people familiar with the situation.

The settlement, which will be in the form of a deferred-prosecution agreement, is the largest by far that a U.S. or European bank has agreed to amid a crackdown in the United States.

Reuters reported last week that London-based HSBC would be forced to pay the $1.8 billion and that criminal charges would be deferred. In November, HSBC said the total penalty could exceed $1.5 billion.

Details about the settlement could come around midday on Tuesday (1700 GMT) in a presentation by the U.S. Justice Department in Brooklyn, New York, or Washington, D.C.

Prosecutors have been investigating the bank for several years over multiple lapses in policing illicit flows of money tied to Mexican exchange houses that have been known to move money for drug traffickers.

This year, the bank has undertaken a public relations campaign and internal reorganisation in London to underscore that it took seriously the Justice Department probe and its anti-money laundering obligations.

In January, it named former top U.S. Treasury Department official Stuart Levey as chief legal officer.

As recently as Monday, HSBC said named Robert Werner, a former Treasury Department official who specialised in money laundering and sanctions violations, as head of financial crime compliance and HSBC money-laundering compliance officer. Werner joined the bank in August.

A number of European and U.S. banks have been forced to pay hundreds of millions of dollars for violating U.S. sanctions laws that prohibit dealings with clients or other banks in Iran, Cuba and Sudan.

On Monday, another British bank, Standard Chartered Plc , agreed to a $327 million settlement for sanctions violations.

Other banks caught up in a sanctions probe that originated with the Manhattan district attorney include Lloyds Banking Group and Barclays Plc in Britain, Credit Suisse Group in Switzerland and Dutch banks ABN Amro Holdings NV and ING Bank NV.

But HSBC's problems extend beyond sanctions violations to a failure to police cash transactions linked to Mexico. Details of those dealings were reported this summer in a sweeping U.S. Senate probe.

According to that report, Mexican and U.S. regulators "expressed repeated concerns" that an HSBC unit handled such a large amount of bulk cash that it had to be tied to "illegal drug proceeds".

How to prosecute HSBC has been a source of debate within the Justice Department. As far back as 2010, a U.S. attorney in West Virginia was prepared to indict HSBC on a money-laundering count, according to a document reviewed by Reuters.

The fact that HSBC has reached a deferred-prosecution agreement could raise questions on Tuesday about whether the bank should have faced a tougher penalty than a big fine.

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