Prosecutors investigating the movement of money by global banks suspect HSBC of laundering money for Mexican drug cartels and moving cash for Saudi Arabian banks with ties to terrorists,according to federal authorities with direct knowledge of the investigations.
The federal and state prosecutors are also investigating whether HSBC flouted United States law by transferring money through its American subsidiary for sanctioned nations,including Iran,Sudan and North Korea.
The weight of the accusations could force HSBC,which has already set aside $700 million to cover the cost of potential fines,to pay at least $1 billion to settle the inquiry,said the authorities with knowledge of the investigation,which would make it the largest such settlement in history.
The money-laundering accusations against HSBC so far are more extensive than the potential violation of United States sanctions that is the focus of the investigations against other foreign banks,including Deutsche Bank and Commerzbank of Germany,BNP Paribas and Credit Agricole of France and the Royal Bank of Scotland,said the law enforcement authorities,who requested anonymity because the investigations are continuing.
This case is not about HSBC complicity in money laundering, a spokesman for HSBC said in a statement on Friday. Rather,its about lax compliance standards that fell short of regulators expectations and our expectations,and we are absolutely committed to remedying what went wrong and learning from it.
The other banks either declined or did not respond to requests for comment.
Anxious to resolve the investigation,HSBC reached out to federal prosecutors in July in hopes of securing a settlement by September,according to the law enforcement officials. But a settlement in the next couple of weeks is highly unlikely,the officials said. The US Justice Department and the Manhattan district attorneys office are poring over HSBC records and still need more time to gauge the full extent of the potential wrongdoing,according to the law enforcement officials. The Justice Department and the Manhattan district attorneys office declined to comment.
HSBC was put in the spotlight in July when the Senate Permanent Subcommittee on Investigations said the bank exposed the US financial system to money laundering and terrorist financing risks between 2001 and 2010. HSBC bank executives testifying at the hearing apologised for the banks past conduct and promised reform.
The US Senate panel said in its report on HSBC that bank officials ignored warning signs and failed to stop illegal behaviour at many points between 2001 and 2010.
Federal officials repeatedly warned the bank to closely monitor its bulk-cash business in Mexico amid concerns that drug traffickers could seize on these operations.
But HSBC officials from 2000 to 2009 gave Mexico,a country under siege from drug crime,violence and money laundering,the banks lowest risk rating for money laundering,according to the Senate report. As a result,the banks Mexican clients were not subjected to rigorous scrutiny.