HSBC to pay $1 bln for money laundering (but no Jail Time for criminals)

24/07/2012 18:16
Men walk into of a branch of HSBC (Reuters/Nikhil Monteiro)

Britain’s largest bank HSBC has revealed it will have to pay a $1 bln fine to US authorities for money laundering offences that took place between 2004 and 2010.

­The disclosure came as a leaked internal memo from the bank’s CEO Stuart Gulliver emerged in Hong Kong. "Between 2004 and 2010, our anti-money laundering controls should have been stronger and more effective, and we failed to spot and deal with the unacceptable behaviour,” Gulliver wrote.

The confession came just weeks after the UK’s second biggest bank, Barclays, was caught up in a rate-fixing scandal and had to pay a $450 mln fine. Chairman Marcus Agius, CEO Bob Diamond and COO Jerry de Misier stepped down under the subsequent pressure.

HSBC could be fined after a Senate probe on money laundering offences is completed, Gulliver said in a memo. However, the bank could face further action from other US authorities in the near future. In 2010 the Federal Reserve and the Office of the Comptroller of the Currency found there was “a significant potential for unreported money laundering or terrorist financing”.

Earlier the US authorities fined the Dutch bank ING for allegedly providing funds to Iranian and Cuban companies through the US financial system, bypassing sanctions. The Dutch bank had to pay $619 mln in settlement.


More info:

From the Telegraph UK:


Santander, Co-operative Bank, Allied Irish Bank, Bank of Ireland, Clydesdale and Yorkshire banks, and Northern Bank have joined the regulator’s ‘redress’ scheme, which will see the banks review their sales of interest rate swaps to small and medium-sized companies and compensate those that have been mis-sold the most complex products.

The FSA agreed a deal with Barclays, HSBC, Lloyds and Royal Bank of Scotland (RBS) in June to compensate firms that were mis-sold interest rate hedging products, which were supposed to protect against a fall in interest rates but left business owners facing huge costs they say they were not warned about.

The seven banks joining the redress agreement, which represent about 10pc of the interest rate swap product market, will “participate in the review of their sales of these products and the redress exercise, on the same basis as those larger banks”, the regulator said in a statement on Monday.

“The FSA has not examined their sales of interest rate hedging products and so has not made any finding of mis-selling, but in agreeing to join the review, they are ensuring customers that bought these products will be treated consistently, irrespective of who they bank with. This will be important to get the best outcome,” the statement said.

The scheme, agreed after the regulator found “serious failings” in banks’ sales of the products following an investigation by the Daily Telegraph, has been criticised by representatives of affected firms for limiting redress to “non-sophisticated” customers and failing to give details such as timelines and how independent oversight of the process will work.

However, the FSA said it has now agreed the terms of reference for the banks’ independent reviewers to manage the process “objectively and consistently”.

These include giving each customer the right to have an independent reviewer present during any meetings or calls with the bank.

The regulator said it “expects these banks to proceed rapidly with their reviews”.

Clive Adamson, director of supervision in the FSA’s conduct business unit, said: “This is a major exercise but one that we hope will ensure even more businesses benefit from having their individual situation reviewed.

“The terms of reference that we have agreed for the independent reviewers shows the detailed and thorough scrutiny that we will expect of them.”

The independent reviewer will typically be an accountancy, law or consultancy firm, the FSA said. While they will be appointed by each bank, the regulator must approve the selection and “where a conflict of interest arises, including where the independent reviewer has a conflict of interest with the customer, we will require the bank to involve a second independent reviewer”.

Affected companies had feared banks would, for example, appoint accountancy firms who had already been involved with administration processes caused by swap sales.

“We will need to be satisfied with each bank’s proposed process before it goes ahead with the redress exercise and the past business review,” the FSA said.

This will involve a pilot exercise before the FSA agrees to the banks proceeding.


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