British bank HSBC is hit with $1.9B in U.S. fines over money laundering claims

American authorities on Tuesday cited “astonishing” dysfunction at the British bank HSBC and said that it had helped Mexican drug traffickers, Iran, Libya and others under U.S. suspicion or sanction to move money around the world.
By LARRY NEUMEISTER and CHRISTINA REXRODE Modified: December 11, 2012 at 9:32 pm •  Published: December 12, 2012
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American authorities on Tuesday cited “astonishing” dysfunction at the British bank HSBC and said that it had helped Mexican drug traffickers, Iran, Libya and others under U.S. suspicion or sanction to move money around the world.

HSBC agreed to pay $1.9 billion, the largest penalty ever imposed on a bank.

The U.S. stopped short of charging executives, citing the bank's immediate, full cooperation and the damage that an assault on the company might cause on economies and people, including thousands who would lose jobs.

The settlement avoided a legal battle that could have further savaged the bank's reputation and undermined confidence in the banking system. HSBC does business in almost 80 countries, so many that it calls itself “the world's local bank.”

Lanny A. Breuer, assistant attorney general of the Justice Department's criminal division, cited a “stunning, stunning failure” by the bank to monitor itself.

Breuer said that it enabled countries subject to U.S. sanction — Cuba, Iran, Libya, Myanmar and Sudan — to move about $660 million in prohibited transactions through U.S. financial institutions from the mid-1990s through September 2006.

Officials noted that HSBC officers in the United States had warned counterparts at the parent company that efforts to hide where financial transactions originated would expose the bank to sanctions, but the protests were ignored.

HSBC even instructed an Iranian bank in one instance how to format messages so that its financial transactions would not be blocked, Breuer said at a news conference announcing the settlement.