UK Banks Hit By Record $2.5B U.S. Fines

By: Posted By Jovarie Downing
By: Posted By Jovarie Downing

(Financial Times) -- HSBC and Standard Chartered, the two biggest UK banks by market value, are to pay more than $2.5bn in fines as part of record settlements with US authorities over money laundering allegations.

People familiar with the agreement said HSBC is expected to pay $1.9bn and enter a deferred-prosecution agreement to settle accusations it allowed itself to be used by money launderers in Mexico and terrorist financiers in the Middle East.

The settlement is expected to be announced on Tuesday. Prosecutors may exhibit some of the weapons that were connected to the HSBC activities in Mexico, said one person familiar with the matter.

StanChart agreed on Monday to pay $327m to several authorities in the US to settle allegations it violated US sanctions law and impeded government inquiries. That sum comes on top of the $340m the UK bank agreed to pay in August to New York state's Department of Financial Services.

Until the HSBC settlement was reached later in the day, StanChart's total $667m was to be the largest combined penalty paid to US authorities by a financial institution for allegedly breaching sanctions policy.

CNNMoney: Standard Chartered fined for violating sanctions

The broad allegations against HSBC were detailed in a July report by the Senate permanent subcommittee on investigations. The bank was alleged to have stripped details from transactions that would have identified Iranian entities, which may have put the bank in breach of US sanctions against that country.

The bank also was said to have moved billions of dollars in cash from its affiliate in Mexico to the US -- more than any other Mexican bank -- despite concerns raised with HSBC by authorities that such sums could only involve proceeds from illegal narcotics.

Since then, HSBC has increased its reserves to some $1.5bn to cover an agreement with US regulators that would settle the allegations.

A spokesman for the bank said: "We are co-operating with authorities in ongoing investigations."

StanChart was accused in August of defrauding regulators, falsifying records and obstructing government inquiries after New York state's banking supervisor alleged the bank hid from regulators key details involving transactions with entities in countries including Iran.

After settling with New York -- following the regulator's threat to revoke StanChart's state banking license -- the bank settled on Monday with the Federal Reserve, Department of Justice, Treasury Department and the Manhattan district attorney.

"The United States expects a minimum standard of behaviour from all financial institutions that enjoy the benefits of the US financial system. Standard Chartered's conduct was flagrant and unacceptable," said Lanny Breuer, assistant US attorney-general.

The bank was accused of stripping identifying information from hundreds of billions of dollars of transactions involving Iran. Benjamin Lawsky, New York state's banking regulator, had called StanChart a "rogue institution".

StanChart said that while authorities alleged that transaction details had been omitted, just a small portion of those payments totalling in the hundreds of millions may have run foul of US sanctions policy.

US regulators have said the key issue in the StanChart case was the bank's alleged dishonesty to bank supervisors regarding the questionable transactions.

StanChart last week told investors it expected to pay some $330m to settle the allegations.

© The Financial Times Limited 2012


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