HSBC has admitted for the first time it may face criminal charges that could see it hit with "significant" penalties stemming from a US investigation into alleged money-laundering by Britain's biggest bank.
The bank is being investigated over possible violations of the US Bank Secrecy Act. HSBC also said that it is co-operating with another investigation by the Department of Justice and the Office of Foreign Asset Control (OFAC) "regarding historical transactions involving Iranian parties and other parties subject to OFAC sanctions".
In an annual filing with the Securities and Exchange Commission, HSBC said that "it is likely there will be some form of formal enforcement action which may be criminal or civil in nature in respect of some or all of the ongoing investigations". The bank, which on Monday reported profits of $17.7bn (£11bn) for 2011, added that fines and penalties stemming from the investigations could be "significant".
In late 2010, HSBC reached an agreement with the Federal Reserve and the Office of the Comptroller of the Currency, another US financial regulator, to improve its compliance with anti-money-laundering rules. The bank said in the filing this week that it is continuing to co-operate with all the enquiries, including one by the US Senate Permanent Subcommittee on Investigations that could potentially see executives at the bank called to testify before Congress.
The investigations could, according to the filing, result in a deferred prosecution in which the accused admits wrongdoing and leaves open the possibility of future prosecution if violations continue.
Separately, HSBC said that the disclosures made in its filing this week "reflect the fact the investigations have developed over the course of the year". Last month the bank hired Stuart Levey, a former US Treasury Department official, as its chief legal officer.
