HSBC to apologise at US Senate money laundering hearing

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HSBC reportedly is to apologise to American lawmakers for failing to have appropriate controls in place to ensure it did not facilitate the financing of terrorism and other criminal activities, transgressions that analysts estimate may cost it up to $1 billion in fines.

The Financial Times reported last night that in a memo to staff ahead of the British bank’s scheduled appearance in front of the US Senate’s investigative panel on July 17, CEO Stuart Gulliver wrote: “Between 2004 and 2010, our anti-money laundering controls should have been stronger and more effective, and we failed to spot and deal with unacceptable behaviour.”

The FT reported that Gulliver further said it was “right that we be held accountable and that we take responsibility for fixing what went wrong”.

His comments came a week after Bob Diamond was forced to resign as chief executive of Barclays in the wake of the bank being hit with a record fine for rigging borrowing rates. Mr Diamond and Marcus Agius, the outgoing chairman, have both apologised for the behaviour of those involved.

“HSBC said in its 2011 annual report that fines relating to money laundering issues could be ‘significant’,” the FT reported.

“There has been speculation among analysts that the bank could be hit with a higher charge than the $619 million ING, the Dutch bank, agreed to pay to settle accusations it violated US sanctions by helping Iranian and Cuban companies move billions of dollars through the US financial system. Some have suggested it could be as much as $1 billion.”

The report said HSBC is expected to provide details of the changes it has made to strengthen its compliance and risk-management controls.

“The money laundering investigation is one of a litany of legal and regulatory woes that have hit HSBC since the financial crisis,” the Ft reported.

“It has suffered a particularly tumultuous period in the US following its rapid expansion there in the years leading up to the financial crisis.

“HSBC faces inquiries relating to its ill-timed $14 billion purchase of Household Finance, a US subprime lender, in 2003. The bank has been accused of breaching international sanctions. Meanwhile, some of HSBC’s private banking customers have been targeted in a tax evasion probe by the US Internal Revenue Service.”

The FT said a number of other banks including Credit Suisse, Lloyds and Barclays have also been fined over failures relating to US money laundering or sanctions breaches.

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