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HSBC’s record $1.9 billion money-laundering fine is the bank equivalent of a stiff speeding ticket

AP Photo/Haraz N. Ghanbari
Raise your hand if your company is paying a fine after a money-laundering probe.
  • Tim Fernholz
By Tim Fernholz

Senior reporter

Published This article is more than 2 years old.

HSBC, the London-based bank that is one of the largest financial institutions in the globe, is expected to pay a settlement of almost $1.9 billion to settle charges that it facilitated money laundering and financial transfers for corrupt officials, terrorists and drug cartels through its US subsidiary.

The settlement would be a record, but we thought it would help to put the payout—nearly $1.3 billion as part of a deferred-prosecution agreement, and a further $650 million or more as a civil fine—in perspective.

It is 11% of HSBC’s $16.8 billion in global profit last year. At that rate, it will take a bit more than a month—41 days—for the bank to earn back its fine payouts.

It is a mere .07% of the bank’s $2.6 trillion total assets around the world. The bank doesn’t actually make money in the United States, but its subsidiary there helps it attract customers eager to move money in the United States or garner investment there.

It is more than a quarter of the $7 billion in bulk cash deposits the banks transferred from Mexico to the US in 2007 and 2008, which authorities in both countries fear was laundered from drug cartels; however, it is just 13% of the $15 billion in total bulk cash deposits the bank accepted from high-risk affiliates without monitoring.

It is 9.6% of the $19.7 billion in undisclosed HSBC transactions with Burma, Cuba, North Korea, Sudan and Iran between 2001 and 2007. These transactions should have met standards established by the Treasury Department’s Office of Financial Assets Control. In the wake of investigations into its practices, HSBC hired Stuart Levey, the lawyer behind US economic sanctions on Iran, to run its legal department.

It is .003% of the $60 trillion in wire transfers that HSBC didn’t monitor for money laundering red flags. Investigators found 17,000 alerts identifying potentially suspicious activity that went unreviewed.

It is 73% of the $2.6 billion in “bearer share accounts” hosted at HSBC. These corporate accounts are frequently used for financial wrong-doing because ownership of the company is assigned to whoever has physical possession of the shares. One HSBC client using one of these accounts was convicted of criminal tax fraud after hiding $150 million in assets and $49 million in income.

It’s about 2% of the company’s total income last year. For a New Yorker making the median income, that’s about $1,105.

How fast would you need drive to get a speeding ticket of that magnitude in the state? Guidelines for fines vary, but you need to be at least 31 mph over the speed limit to get a $600 ticket. If it was your third offense, you’d be charged up to $375 more, bringing the total up to $975. Add in the $70 fee for any moving violation and, if you’ve accumulated demerits on your licence because of past violations (like the two previous speeding tickets) you’ll pay another $300, bringing you in range of an HSBC-style penalty.

Of course, a multiple offender going 31 mph over the speed limit is likely to spend a few days in jail, or at least do some community service. No one from HSBC will spend time behind bars as a result of this investigation.

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