HSBC sets aside $2 billion for US,UK flaws

HSBC set aside $700 million to cover fines and other costs for an anti-money laundering scandal,after a US Senate report criticised it this month for letting clients shift funds from dangerous and secretive countries,notably Mexico.

Written by Reuters | London | Published: July 31, 2012 1:27:13 am

HSBC’s boss has said that revelations of lax anti-money laundering controls had been “shameful and embarrassing” for Europe’s biggest bank,and may force it to pay out well over $2 billion for those flaws and in compensation for UK mis-selling.

HSBC set aside $700 million to cover fines and other costs for an anti-money laundering scandal,after a US Senate report criticised it this month for letting clients shift funds from dangerous and secretive countries,notably Mexico.

The ultimate cost could be “significantly higher”,the bank’s chief executive Stuart Gulliver said. “What happened in Mexico and the US is shameful,it’s embarrassing,it’s very painful for all of us in the firm,” Gulliver said.

“We need to execute on the compliance changes and then prove ourselves worthy and rebuild this over a number of years. There are no quick and easy fixes,” he said. The Senate report criticised a “pervasively polluted” culture at the bank and said HSBC’s Mexican operations had moved $7 billion into its US operations between 2007 and 2008.

The provision ate into first-half underlying profits,which fell 3 per cent from a year earlier to $10.6 billion,excluding gains from assets sales and losses on the value of its own debt. HSBC also set aside another $1.3 billion to compensate British customers for mis-selling loan insurance to individuals and interest rate hedging products to small businesses.

It is also one of more than a dozen banks under scrutiny in a global interest rate-rigging scandal that has rocked the sector and further damaged the reputation of bankers following criticism of their culture and standards.

“It’s very unfortunate and deeply concerning that even the banks considered more secure such as HSBC are so seriously at risk,” said a top 30 investor in HSBC.

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