LONDON (AP) — HSBC avoided a legal battle that could further savage its reputation and undermine confidence in the global banking system by agreeing today to pay $1.9 billion to settle a U.S. money-laundering probe.
Europe’s largest bank by market value will pay the biggest penalty ever imposed on a bank after facing accusations it transferred funds through the U.S. from Mexican drug cartels and on behalf of nations such as Iran that are under international sanctions.
“We accept responsibility for our past mistakes,” said HSBC Chief Executive Stuart Gulliver. “We have said we are profoundly sorry for them, and we do so again.”
It’s the latest scandal to hit banks since the financial crisis started in 2008. Hours earlier, Standard Chartered PLC, another British bank, signed an agreement with New York regulators to settle a money-laundering investigation involving Iran with a $340 million payment.
“These banks are operating in an environment where you can’t afford to have uncertainty attached to your name, and they are dependent on confidence from their investors,” said Sabine Bauer, director of financial institutions at Fitch Ratings. “And that makes them keen to get past such events very quickly and settle.”
Banks are facing greater scrutiny since the financial crisis. A string of banking scandals have highlighted lax oversight and a culture of arrogance and entitlement.
Money laundering by banks has become a priority target for U.S. law enforcement. Since 2009, Credit Suisse, Barclays, Lloyds, and ING have all paid big settlements related to allegations that they moved money for people or companies that were on the U.S. sanctions list.
HSBC conceded that its anti-money laundering measures were inadequate and that it has taken big steps in beefing up its controls.
The bank also said it has reached agreements over investigations by other U.S. government agencies and expects to sign an agreement with British regulators shortly.