HSBC to Pay $101.5 million to resolve federal fraud charges

Posted January 20, 2018

Bank employees traded the British pound just before executing big transactions for the clients in a way aimed at moving the currency in a direction that would benefit HSBC and hurt the clients, according to US prosecutors.

Europe's biggest bank is coughing up cash yet again over its past misdeeds.

"HSBC's admissions in connection with this resolution confirm that the company misused confidential client information for its own profit on more than one occasion", said Acting Assistant Attorney General Cronan.

British financial giant HSBC has agreed to pay more than $100 million to USA authorities after admitting to defrauding clients during multi-billion-dollar foreign exchange transactions, the Justice Department announced Thursday.

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As part of the deal, the bank has also entered a three-year deferred prosecution agreement with the DoJ.

The bank said that the conduct in the contract occurred in 2010 and 2011 and since then it has introduced measures to toughen its internal controls.

HSBC has agreed to pay a $63.1 million criminal fine and also $38.4 million in restitution for one of the companies it defrauded.

"The DoJ recognises these extensive improvements, noting that HSBC has dedicated significant resources to strengthening its systems and controls".

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In one March 2010 transaction, it converted approximately GBP5.3 billion ($7.4 billion) to US dollars for a client - identified in court documents only as a financial-services company - that resulted in a $38.4 million profit for HSBC.

Johnson was found guilty of defrauding Cairn Energy in what prosecutors described as a clear case of "front-running" the company's $3.5bn order.

As a result, the value of sterling surged to its highest level in two days on 7 December 2011, shortly before the 3pm deadline for the deal.

HSBC has since agreed to repay Cairn Energy $8.1m in settlement over the incident. The clients had hired HSBC to execute multi-billion dollar foreign exchange transactions involving the British Pound Sterling.

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Since this recent controversy and run in with the U.S. authorities, the lender has promised to boost its compliance programme and internal controls. In September it was fined $175m for "unsound practices" in its foreign exchange transactions.