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HSBC Settles Swiss Money-Laundering Probe; To Pay $43M - Analyst Blog

In a quick resolution of regulatory probe, HSBC Holdings plc HSBC has agreed to pay CHF 40 million ($42.8 million) to the Swiss authorities for settling allegations of money laundering. The probe was initiated after media reports were spurred by documents obtained by the French newspaper Le Monde from the International Consortium of Investigative Journalists (“ICIJ”) in Feb 2015.

Notably, HSBC will not face any criminal charges and would be paying the above-mentioned fine for “past organizational deficiencies”. The penalty amount was decided on the basis of an estimate of profit made by the company from the accounts under probe.

The documents that were used for initiating the probe were extracted from the bank and handed over to the European law enforcement authorities by a one-time employee, Herve Falciani. These files described incidents where HSBC‘s Swiss private banking unit regularly permitted its clients to withdraw a large amount of cash (mostly in foreign currencies), marketed schemes that enabled wealthy clients to avoid European taxes and colluded with clients to hide clandestine accounts from domestic tax authorities.

The HSBC files, spanning 2005–2007, shed light on some 30,000 accounts holding assets worth roughly $120 billion (£78 billion). Depositors at HSBC‘s Swiss unit included royal families, convicted drug dealers, ambassadors, terror suspects, elected officials, corporate executives and athletes.

HSBC had publicly acknowledged the wrongdoing and stated, “We acknowledge and are accountable for past compliance and control failures."

Despite resolution of the aforesaid investigation, HSBC still faces probes by the U.S., French, Argentina and Belgian authorities over similar charges.

Currently, HSBC sports a Zacks Rank #1 (Strong Buy). Other foreign banks worth considering include National Bank of Canada NTIOF, Banco Santander-Chile BSAC and UBS Group AG UBS. All these stocks hold the same Zacks Rank as HSBC.

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