Although international banks are caught laundering money for drug cartels and terrorist groups, they can't be shut down or fined enough to make them not do it again, because US politicians need to continue doing business with those banks. They can't shut the bank down, ending their lobby re-election income, and move their accounts to other banks. When moving the accounts, they might be asked why which could be embarassing.
"The settlement had been widely expected following a report by the US Senate, published earlier this year, that was heavily critical of HSBC's money laundering controls.
The report alleged that:
- HSBC in the US had not treated its Mexican affiliate as high risk, despite the country's money laundering and drug trafficking challenges
- The Mexican bank had transported $7bn in US bank notes to HSBC in the US, more than any other Mexican bank, but had not considered that to be suspicious
- It had circumvented US safeguards designed to block transactions involving terrorists drug lords and rogue states, including allowing 25,000 transactions over seven years without disclosing their links to Iran
- Providing US dollars and banking services to some banks in Saudi Arabia despite their links to terrorist financing
- In less than four years it had cleared $290m in "obviously suspicious" US travellers' cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business
The report suggested HSBC accounts in Mexico and the US were being used by drug barons to launder money.
BBC business editor Robert Peston said that as big as the $1.9bn penalty looks, it could have been much worse.
"HSBC has signed a Deferred Prosecution Agreement for breaches of the US Bank Secrecy Act, the Trading with the Enemy Act and assorted money laundering offences. This is in effect putting the bank on probation," he said.
"But if HSBC had been indicted for these offences, that would have meant that the US government and others could no longer have conducted business with it, which would have been humiliating and highly damaging.