HSBC expects fines to reach at least $1.5 billion

WEDNESDAY, NOV. 7: HSBC admitted the $1.5 billion it has put aside to cover fines from a US investigation into anti-money laundering rule breaches could go up.

Europe’s biggest bank also said on Monday, as reported by Reuters, it expects the fines to lead to criminal charges.

HSBC conceded the investigation had hurt the bank’s reputation and revealed it had set aside a further $800 million to cover a possible fine for breaking anti-money laundering controls in Mexico, adding to $700 million put aside in July.

But chief executive Stuart Gulliver, following talks with the authorities carrying out the probe, said: “It could be significantly higher.”

The latest developments come after a US Senate report in July slammed HSBC for allowing clients to shift potentially-illicit funds from countries such as Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria.

The London-based bank has been frank, saying the whole episode was “shameful and embarrassing” after the report highlighted a “pervasively polluted” culture at the bank. The report also said the HSBC’s Mexican operations had moved $7 billion into its US operations between 2007 and 2008.

A number of staff have reportedly left the firm because of the investigation.

“The report undoubtedly caused considerable reputational damage to HSBC. The extent to which that has resulted in loss of business is hard to measure, but it has undoubtedly damaged our brand,” Gulliver said.

Shares in HSBC were down 1.4 per cent at 617.5 pence on Monday slightly weaker than a fall in the European bank index.

“The money laundering provision is a concern, particularly given the uncertainty on what the final figure might be,” said Richard Hunter, head of equities at stockbroker Hargreaves Lansdown.

Gulliver admitted there is work to be done. “There’s a whole series of things that came from probably a decade in the 2000 to 2008-09 period that have surfaced now that the industry needs to sort out, remediate, and make sure doesn’t happen again.”