HSBC's Long List of Troubles Just Got Even Longerby
HSBC Holdings Plc has had a rough time of it lately.
Since former Swiss employee Herve Falciani made off with client data in 2008 and fled to France, Europe’s biggest bank has been dealing with the fallout as investigations into money laundering and tax evasion have begun around the world.
On Thursday, HSBC announced it’s been charged in a related French tax-evasion probe and ordered to pay bail of $1.1 billion. There are similar investigations under way in Belgium, Switzerland, Argentina and India. And after fresh details emerged in February from the Falciani files, Chief Executive Officer Stuart Gulliver and Chairman Douglas Flint were grilled by U.K. lawmakers, and conceded how damaging the affair had been to the bank’s reputation.
Heidi Ashley, an HSBC spokeswoman, declined to comment.
Fallout from the Falciani case isn’t all that HSBC is grappling with on the legal front. Here are a few of its other headaches:
- Money laundering: The U.S. Department of Justice installed an independent monitor at the bank, to ensure the bank complies with the terms of a 2012 settlement for helping Mexican drug dealers launder money, as well as hiding transactions that violated U.S. sanctions against Iran. HSBC paid a $1.9 billion fine. This week, the monitor filed a report saying it’s falling short in meeting the goals set out in the agreement. HSBC said it’s “making steady progress” and noted it still has three years to go in its plan to revamp its compliance program.
- Currency Rigging: HSBC is under investigation by authorities including the Justice Department, which is scrutinizing whether the bank’s currency-trading practices violated the 2012 money-laundering settlement terms, a person with knowledge of the matter said last month. The bank has already settled with the Commodity Futures Trading Commission and the U.K. Financial Conduct Authority in November for $618 million.
- Payment protection insurance: The bank has paid out more than 2.5 billion pounds ($3.7 billion) in redress to customers it had sold financial products they didn’t want or need. It’s Britain’s costliest scandal since the financial crisis, totaling 23 billion pounds and counting.
- Precious metals: U.S. investigators have ordered HSBC to provide documents on its precious-metals dealings as part of criminal and regulatory probes into the markets. It’s also been named in several class actions alleging the bank conspired to manipulate gold and silver prices.
- U.S. mortgage secularization: HSBC paid $550 million last year to the Federal Housing Finance Agency to resolve accusations of misconduct in its handling of mortgage securities sold to U.S. taxpayers before the financial crisis. HSBC “expects the focus on mortgage secularizations to continue” and said more investigations, litigation and charges may come. It’s been targeted in numerous investor lawsuits against mortgage-securities trustees as well.
- Bernard Madoff: HSBC is accused of benefiting from Madoff’s fraud along with banks including JPMorgan Chase & Co. and UBS Group AG. The bank booked litigation costs of $298 million in 2013 and said in its 2014 annual report it faces litigation in the U.S., the U.K., Ireland, the Cayman Islands, Luxembourg and Bermuda. HSBC has said it’s not yet possible to estimate liabilities, “but they could be significant.”
- Private bank work in the U.S.: In November, the bank paid $12.5 million to settle Securities and Exchange Commission claims that its Swiss private-banking unit solicited U.S. investors without being registered. HSBC improperly amassed as many as 368 client accounts and earned $5.7 million in fees in the process, the SEC said.
- Hedge fund leaks: In November, the Wall Street Journal reported that the Justice Department opened an investigation into allegations an HSBC currency trader leaked confidential client information to a hedge fund before a proposed $35 billion acquisition it was advising on.