Updated to reflect Federal Reserve enforcement action
NEW YORK (
shares are rising near one-year highs after the London-based banking conglomerate reached a $1.92 billion settlement with U.S. authorities on a probe that alleged the bank facilitated billions of dollars of bank transfers to Iran and helped laundering money for Mexican drug cartels.
In the deal, HSBC agreed to a deferred prosecution agreement with the U.S.
Department of Justice
and reached agreements with other U.S. government agencies. The bank also said it "anticipates finalizing United Kingdom Financial Services Authority shortly," on UK-based money laundering claims.
On Tuesday, the
issued a consent cease and desist order against HSBC and fined the bank a $165 million civil penalty, the largest ever related to violations of Bank Secrecy Act and U.S. economic sanctions. That fine is included in HSBC's $1.92 billion total fine.
"We accept responsibility for our past mistakes," Stuart Gulliver, HSBC's chief executive said in a statement. "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," he added.
HSBC rose less than 1% on the New York Stock Exchange in early trading, adding to year-to-date gains in excess of 30%. The bank's shares sit just below 52-week highs hit earlier in December, in the wake of details of its money laundering settlement.
Although the terms of the settlement represent a record fine, HSBC's balance sheet indicates the bank was prepared for such an outcome. As of the third quarter, HSBC set aside $1.5 billion to cover a potential settlement and warned that it could face criminal charges and see costs "significantly" exceed the provision.
The New York Times
U.S. lawmakers were considering a far more punitive enforcement of HSBC's money laundering violations.
According to the report some prosecutors at the DoJ and the Manhattan district attorney's office were pressing for HSBC to plead guilty to criminal charges such as violating the
Bank Secrecy Act
, citing unnamed sources. Such a guilty plea could have significantly disrupted HSBC's U.S. business; however, the New York Times reports prosecutors would up favoring a host of sanctions and financial penalties over criminal charges.
In August, ratings agency Standard & Poor's downgraded its outlook for HSBC, highlighting the then ongoing money laundering probe as a negative for the bank's long-term business. In particular, S&P indicated any sanctions against doing business in the U.S. could weaken the bank's lending and trade finance in the U.S.