HSBC money laundering hit to be big

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HSBC money laundering hit to be big

HSBC money laundering hit to be big
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HSBC has said is likely to face criminal charges in the US over a failure to prevent money laundering.

Europe’s biggest bank also anticipated a fine significantly bigger than the 1.2 billion euros it had earlier made provision for.

That statement came as the London-based lender reported an underlying quarterly profit of 3.9 billion euros.

It was helped by a bigger-than-expected drop in losses from bad debts and a solid performance by its investment banking arm.

A US Senate report in July slammed HSBC for letting clients shift potentially illicit funds from countries such as Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria.

HSBC had said the issue was “shameful and embarrassing” after the 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 report undoubtedly caused considerable reputational damage to HSBC. The extent to which that has resulted in loss of business is hard to measure, but it has undoubtedly damaged our brand,” Chief Executive Stuart Gulliver said.

He said a number of staff had left the firm as a result of the investigation and a number had had pay clawed back.

“The money laundering provision is a concern, particularly given the uncertainty on what the final figure might be,” said Richard Hunter, head of equities at stockbroker Hargreaves Lansdown.

Time to clear up the mess

The issue is another blow for the reputation of British banks, after rival Barclays was fined $450 million (352 million euros) in June for rigging Libor interest rates and the industry has had to set aside more than 12 billion pounds (15 billion euros) to compensate UK customers for mis-selling of insurance products.

Gulliver said it would take time to clean up the mess. “There’s a whole series of things that came from probably a decade in the 2000 to 2008-09 period that have surfaced now that the industry needs to sort out, remediate, and make sure doesn’t happen again.

“It will take a chunk of time to clean the system and then it will take a little bit longer than that for trust to be restored more fully,” he said, adding that it was his job to get HSBC back to a position “where it’s regarded as the best of the bunch”.