Dec 11 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
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
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.
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
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.