HSBC braced for £1bn money laundering fine

6 November 2012

HSBC has put aside an extra £500m (US£800m) to cover possible money laundering fines, adding to the £440m (£$700m) that it has already made provision for in fines after a US senate report in July warned that lax controls meant it had laundered money for Mexican drug cartels and others.

The extra provision was made by HSBC in its Q3 results yesterday, covering infringements from 2004-2010. Chief executive, Stuart Gulliver, added that the eventual fine might be "higher, perhaps significantly higher", suggesting that even the £1bn (US$1.5bn) put aside so far may not be enough once discussions with US authorities are finalised.

HSBC's Q3 2012 results yesterday showed a drop in pre-tax profit to $3.5bn compared with $7.1bn in the same period last year. The results also contained a further $353m set aside to cover separate payment protection insurance (PPI) mis-selling claims from UK customers. This separate regulatory breach takes HSBC’s total for mis-sold PPI claims to $2.1bn, which is smaller than other UK banks, but considering this is now the biggest mis-selling scandal in UK banking history – standing at £13bn for now – that is little comfort.

The US Senate report said that HSBC bank had a “pervasively polluted” culture that meant it was exposed to drug trafficking and terrorist financing flows. It cost the bank’s head of group compliance, David Bagley, his job at the time as he officially resigned although he has yet to actually leave the bank, with David Shaw as his named ‘acting’ successor.

HSBC said it is still in discussions with US authorities over the final level of its money laundering fines, but the extra provision made shows that these talks are perhaps not going well.

• For some background on the on-going battles between UK banks, such as Standard Chartered and HSBC, and the US auhtorities please see our earlier Bobsguide blog.

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