HSBC apologizes as key U.S. Senate hearing starts
* Permanent Subcommittee on Investigations holds HSBC hearing
* Report called bank 'pervasively polluted'
* HSBC apologizes, promises to change
* Shares dip; analysts expect $1 bln fine
By Carrick Mollenkamp
WASHINGTON, July 17 (Reuters) - HSBC Holdings Plc will put itself at the mercy of the U.S. Senate on Tuesday, acknowledging shortcomings in its anti-money laundering operations and promising to fix what a scathing report called a "pervasively polluted" culture at the bank.
The Senate report, which came after a year-long inquiry, said the bank had routinely acted as a financier to clients routing funds from the world's most dangerous corners, including Mexico, Iran and Syria.
The Senate's Permanent Subcommittee on Investigations will kick off a day of hearings Tuesday with officials from the U.S. Treasury and Department of Homeland Security, but the fireworks are expected later in the morning when HSBC executives come to testify.
The harshest spotlight will be on Stuart Levey, who joined the bank in January as chief legal officer. He had been the Treasury Department's top official on terrorism finance from 2004 to 2011. He returns to Washington on the hearing's third panel to make HSBC's case that the bank has finally fixed its operation to prevent money laundering.
Despite the Senate's tough assessment, HSBC shares fell less than 1 percent in Tuesday afternoon trading in London. Analysts warned, though, that the bank faced massive financial penalties -- and perhaps worse, found itself in the crosshairs during an election year.
"(The) most important consequence is that the bank is now under the microscope ... at a very bad time where banks are used as scapegoats by politicians globally," analysts at Italian bank Mediobanca said in a research note, adding that they expect HSBC to face a $1 billion fine as well.
In a statement to British regulators early Tuesday, the bank began its mea culpa.
"We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect," it said. "We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."
HSBC will have company in the Senate's harsh spotlight -- the report was also highly critical of the Office of the Comptroller of the Currency, a major U.S. bank regulator. The Senate report faulted the office, whose top officials will testify later in the day, for its oversight of HSBC.
In prepared testimony released at the start of the hearing, the OCC acknowledged the need for changes the report called for in its oversight of anti-money laundering operations.
"We agree with the concerns reflected in each of the recommendations and will take actions in response," it said.
The OCC will also testify on the extent of the failings it found in HSBC's money laundering controls, and the orders it issued to the bank to correct them.
- Tweet this
- Share this
- Digg this
- Several Arab countries offer to join air campaign on Islamic State, say U.S. officials
- Islamic State executes eight Sunnis in northern Iraq
- With eye on China, India to develop disputed border region
- Wall St Week Ahead - Fed change unlikely to blunt equities' appeal over bonds
- NATO countries have begun arms deliveries to Ukraine - defence minister