* Permanent Subcommittee on Investigations holds HSBC
* Report called bank 'pervasively polluted'
* HSBC apologizes, promises to change
* Shares dip; analysts expect $1 bln fine
By Carrick Mollenkamp
WASHINGTON, July 17 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
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
"(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.