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Criminal charges likely in U.S. probe of money-laundering at HSBC

November 05, 2012|By E. Scott Reckard
  • The headquarters of the giant international bank HSBC Holdings in Canary Wharf, London. HSBC says it likely will be charged criminally and have to pay more than $1.5 billion as a result of a U.S. investigation into money-laundering allegations.
The headquarters of the giant international bank HSBC Holdings in Canary… (HSBC Holdings )

The U.S. government is likely to file criminal charges related to money-laundering against HSBC Holdings, the international banking giant said in its third-quarter financial report.

London-based HSBC, Europe's largest bank, reported Monday that it set aside an additional  $800 million to cover its liability in the case, bringing the total so far to $1.5 billion. The potential penalties could be "significantly higher," it said.

Banks have fallen under heightened scrutiny amid evidence they have been used to funnel funds to terrorists and process dirty money for drug lords.

Previous money-laundering settlements involved Wachovia Corp. of Charlotte, N.C., now part of Wells Fargo & Co., which paid $140 million in 2010 to settle a federal investigation. Britain's Standard Charter agreed this year to pay $340 million. 

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HSBC's self-described liability of more than $1.5 billion dwarfs those civil cases, which did not include criminal charges.

“The size of the provision is a shock,” Simon Maughan, a financial industry strategist at Olivetree Securities Ltd. in London., told Bloomberg News. “There was a huge fuss made about Standard Chartered’s fine, but this far exceeds that.”

HSBC is named after its founding unit, the 147-year-old Hongkong and Shanghai Banking Corp. It has more than 300 U.S. offices, 38 of them in California, according to the Federal Deposit Insurance Corp.

HSBC barreled into the United States as the housing boom took hold in 2003, paying more than $15 billion for subprime lender Household International Inc., the parent of the Household and Beneficial finance companies. After sustaining tens of billions of dollars in losses, it shut down the subprime unit entirely in 2009.

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