Europe’s biggest bank, HSBC, has agreed to pay a record 1.5 billion-euro fine for failing to prevent money laundering and failing to respect US sanctions against Iran.
US prosecutors brought the accusations against the British bank following an investigation of several years.
Another major player, Standard Chartered, agreed to pay a fine which, added to one ordered earlier by the New York state banking watchdog, will bring the total to more than half a billion euros – for other potentially illicit practices.
The US Senate this summer said HSBC didn’t monitor activity properly when clients moved funds around from places including Mexico, Iran and Syria.
The bank admitted to a breakdown of controls and apologised, also saying it had reached a deferred-prosecution agreement with the Department of Justice.
HSBC was accused of conducting the equivalent of 12 billion euros worth of transactions with Iran, against international sanction rules, and of handling 5 billion euros worth of Mexican drug cartel proceeds.
Standard Chartered is said to have hidden some 192 billion euros worth of transactions with Iranian clients. It also went against US sanctions on Myanmar, Libya and Sudan.
Last month, HSBC told investors it had set aside $1.5 billion to cover fines. Now it has to pay $1.9 billion (in euros 1.5 billion). But some independent evaluators downplayed the impact.
Francis Lun, Managing Director at Lyncean Holding in Hong Kong said: “Well, it is quite a big amount, certainly. It means it’s taking away one quarter of HSBC’s profit, so they will have to cut dividend and cut costs to get that back, but it won’t cripple the bank and that is the main point.”
The US authorities say they will make sure Standard Chartered reinforces correct practices. This analyst in London says it’s likely to be in recovery mode at least into the near future.
Alastair McCaig at IG said: “I think as far as the fiscal issues are concerned it is coverable. I think reputationally speaking, though… this might take a bit of time to get that reputation back.”
Regulators ordered HSBC to improve monitoring of suspicious money flows in 2003. In 2010, one body called its programme for complying with US law enforcement agencies for sanctions violations “ineffective”.