HSBC to Pay Record $1.92 Billion Settlement to U.S. Government for Money Laundering Conspiracy

British Bank HSBC agreed Tuesday to pay a record $1.92 billion to settle allegations resulting from a wide-ranging international money-laundering investigation with U.S. federal and state authorities, The Chicago Tribune reported.

The U.S. Justice Department on Tuesday also charged the bank with failing to maintain an effective program against money laundering and conduct due diligence on certain accounts. In documents filed in federal court in Brooklyn, it also charged the bank with violating sanctions laws by doing business with Iran, Libya, Sudan, Burma and Cuba.

The settlement, if accepted, would end probes "focused on accusations that HSBC's U.S. arm transferred billions of dollars through its U.S. arm for Mexican drug cartels, Iran, which is under international financial sanctions, and others," said USA Today.

Formally known as a deferred prosecution agreement, the settlement allows HSBC to avoid criminal money laundering, and other charges, which "could have been a financial death sentence for the bank," noted USA Today.

A July report and hearing by the Senate permanent subcommittee alleged foreign HSBC banks "actively circumvented" safeguards at the bank's U.S. arm designed to block transactions involving alleged terrorism, drug trafficking and rogue nations. The bank accepted responsibility at the time, but claimed it was actively taking steps to make sure this sort of thing never happened again.

"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes," said Chief Executive Stuart Gulliver.

"Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters."

Under the deferred prosecution agreement, HSBC said an independent monitor will evaluate the bank's progress in fully implementing new procedures and ending relationships considered at risk for money laundering.

The agreement covers an investigation that involved the Department of Justice, the Manhattan District Attorney in New York, the Federal Reserve, the Treasury Department's Office of Foreign Assets Control and its financial crimes enforcement unit, and the Comptroller of the Currency.

HSBC will forfeit $1.25 billion and pay $655 million in civil penalties, a U.S. law enforcement official said Monday. The forfeiture of $1.3 billion is a record amount involving a bank, according to the Tribune. Under the deferred prosecution agreement, HSBC will be accused of violating the Bank Secrecy Act and the Trading With the Enemy Act.

If HSBC meets certain conditions for the deferred prosecution agreement, such as stronger internal controls to prevent money laundering, the bank can avoid prosecution, USA Today reported.

The bank announced new regulatory measures Monday it plans to implement so it can meet the terms of the settlement. HSBC says that that Robert Werner, a former head of the Treasury Department agencies responsible for sanctions against terrorist financing and money laundering, will begin a new role at HSBC as head of financial crime compliance and become the bank's money-laundering reporting officer.