HSBC Agrees $1.9bn Money-Laundering Settlement

Published in Company Comment on 11 December 2012

HSBC (LSE: HSBA) reaches agreement with US authorities.

HSBC Holdings (LSE: HSBA) (NYSE: HBC.US) this morning announced that it has reached settlements with authorities in the US regarding "inadequate compliance" with anti-money laundering laws. 

The bank has agreed payments of $1.92bn, while the terms also include "further action to strengthen its compliance policies and procedures", as well as requiring HSBC to "continue to co-operate fully with regulatory and law enforcement authorities". HSBC is also hopeful of finalising an undertaking with the Financial Services Authority in the near future.

Group chief executive Stuart Gulliver commented: 

"We accept responsibility for our past mistakes... The HSBC of today is a fundamentally different organisation from the one that made those mistakes. 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.

"While we welcome the clarity that these agreements bring, ensuring the highest standards wherever we do business is an ongoing process. We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world." 

In addition to reaching an agreement to achieve a "global resolution with all other US government agencies that have investigated HSBC's past conduct related to these issue", the announcement confirmed a deferred prosecution agreement (DPA) with the US Department of Justice, which went on record to state:

"Management has made significant strides in improving 'tone from the top' and ensuring that a culture of compliance permeates the institution. The efforts of management have dramatically improved HSBC Bank USA's and HSBC Group's Bank Secrecy Act / Anti-Money Laundering and Office of Foreign Assets Control compliance programs."

Internal structural changes include increasing its anti-money laundering (AML) spending around nine-fold between 2009 and 2011, and its AML staffing approximately ten-fold.

Upon the news, shares in HSBC slipped a little in early trading this morning, down 0.5% to 638.30p at the time of writing, but have recovered from the November slide that brought the shares down to around 611p following the news in its Q3 statement that the money-laundering bill had hit $1.5bn.

Whether HSBC is a 'buy' based on this morning's news that it has reached agreement with US authorities, its share-price rating and the general outlook for the banking sector remains your decision.

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> Sam does not own shares in HSBC.

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Longtermyieldman 11 Dec 2012 , 8:55pm

The usual pattern: some fat-cat bankers enrich themselves by breaking the law; when they're found out, it's the shareholders that pay the fine and the state (which should share the blame for failing to protect shareholders by policing them properly) receives the money. Yet another example of wealth being transferred between members of the privileged elite, at the expense of the little guy.

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