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HSBC expects criminal charges for money-laundering

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By The Los Angeles Times
Monday, Nov. 5, 2012, 6:18 p.m.

The federal government is likely to file criminal charges related to money-laundering against HSBC Holdings, the international banking giant said in its third-quarter financial report.

London-based HSBC, Europe's largest bank, reported Monday that it set aside additional $800 million to cover its liability in the case, bringing the total so far to $1.5 billion. The potential penalties could be “significantly higher,” it said.

Banks have fallen under heightened scrutiny amid evidence they have been used to funnel funds to terrorists and to process dirty money for drug lords.

Previous money-laundering settlements involved Wachovia Corp. of Charlotte, now part of Wells Fargo & Co., and Britain's Standard Charter, both of which agreed to pay multimillion-dollar amounts.

HSBC's self-described liability of more than $1.5 billion dwarfs those civil cases, which did not include criminal charges.

“The size of the provision is a shock,” Simon Maughan, a financial industry strategist at Olivetree Securities Ltd. in London., told Bloomberg News. “There was a huge fuss made about Standard Chartered's fine, but this far exceeds that.”

HSBC is named after its founding unit, the 147-year-old Hongkong and Shanghai Banking Corp. It has more than 300 offices in the United States, according to the Federal Deposit Insurance Corp.

HSBC barreled into the United States as the housing boom took hold in 2003, paying more than $15 billion for subprime lender Household International Inc., the parent of the Household and Beneficial finance companies. After sustaining tens of billions of dollars in losses, it shut down the subprime unit entirely in 2009.

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