HSBC Settles FX Rigging Investigation with US Department of Justice

Reuters

HSBC Holdings (LON:HSBA) has agreed to pay $101.5 million to settle a foreign exchange investigation in the United States, the Asia-focused lender has said.

The lender admitted that, in two separate incidents, its traders misused confidential information provided by their clients and used it for their own profit.

"This sort of misconduct not only harmed their clients, costing the victims money, but it also ran a serious risk of undermining the public's confidence in our financial markets", Cronan said.

HSBC noted that the payment reflected a 15-percent reduction in the fine amount in recognition of the bank's cooperation during the investigation as well as its "extensive remediation". The scheme netted the bank more than $46 million in profits in 2010 and 2011. It was also alleged that HSBC made misrepresentations to one client, Cairn Energy, to hide the self-serving nature of the trades.

Federal Bureau of Investigation special agent in charge Timothy Slater said: "HSBC defrauded two bank clients in a front-running scheme that enabled them to acquire millions of dollars to benefit their institution and harm their clients". The company in question wasn't identified by the Justice Department or HSBC.

"HSBC is committed to ensuring fair outcomes for its customers and protecting the orderly and transparent operation of the markets", the bank said this morning. The bank had previously settled for about $8 million with Cairn Energy.

Last October, a former HSBC employee, Mark Johnson, was convicted of fraud in connection with the case. The former head of foreign exchange cash trading at HSBC faces up to 20 years in federal prison.

"Since then, HSBC has introduced a number of measures created to make the control environment in its Global Markets business more robust".

The deal with the Justice Department is the latest costly settlement for HSBC.

HSBC said on Friday it will take steps to improve its Global Markets compliance programme and internal control, as well as cooperate with regulatory and law enforcement authorities.

In recent years it has agreed to pay billions of dollars in relation to cases that involved allegations of money laundering, foreclosure abuses, exchange rate manipulation and securities fraud.

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