WASHINGTON (BLOOMBERG) - HSBC Holdings has agreed to pay about US$100 million (S$132 million) in penalties to resolve a US Justice Department investigation into the rigging of currency rates, part of a probe that has already led to the conviction of one of its former bankers and charges against another.
As part of the deal, HSBC entered into a deferred-prosecution agreement with prosecutors and promised to help with the criminal case against former traders and any other individuals swept up in the matter.
A DPA document, which must be approved by a judge, was filed in federal court in Brooklyn on Thursday (Jan 18). The three-year agreement requires the bank to cooperate with ongoing currency probes and "any other conduct under investigation" by the US
The penalty comes a month after the London-based bank was released from a five-year deferred-prosecution agreement with the Justice Department for helping Mexican drug cartels launder money and breaching international sanctions by doing business with Iran.
HSBC released a statement saying that the conduct in the agreement occurred in 2010 and 2011 and that it has since introduced measures to strengthen its internal controls.
"HSBC is committed to ensuring fair outcomes for its customers and protecting the orderly and transparent operation of the markets," the bank said.
The US$100 million that HSBC agreed to pay is less than criminal penalties paid by other global banks almost three years ago for misconduct over the rigging of currency markets. In the 2015 resolutions, five banks pleaded guilty and each paid between US$200 million and US$925 million after admitting to colluding with each other to manipulate currency benchmarks.
The earlier cases were based on antitrust law over conduct affecting an entire market, whereas the HSBC matter was a fraud perpetuated on its own clients.
The HSBC case involves conduct by at least two employees: Mark Johnson, a former global head of foreign-exchange trading, and Stuart Scott, a former head of European currency trading.
In October, a federal jury in Brooklyn convicted Johnson of front-running a US$3.5 billion client order. His sentencing is set for Feb 15. Scott, who was indicted with Johnson in 2016, is appealing a UK court order that he be extradited to the US to face charges.
The two are accused of conspiring to take advantage of inside information about Cairn Energy Plc's plans to sell part of its stake in an Indian subsidiary. HSBC was hired by Cairn Energy to trade about US$3.5 billion in proceeds of the sale to pounds.
Johnson and Scott began buying pounds in the days before the transaction, anticipating that those purchases and the Cairn Energy deal would together cause the price of pounds to rise, a practice known as "ramping." Once the transaction was executed, the pounds they bought became more valuable, and they sold the pounds for a profit, according to prosecutors.
Two other traders whose names surfaced in evidence at Johnson's trial, including the head of foreign-exchange trading in the Americas, recently left the bank, a person familiar with the situation has said. There's no indication that the departures were linked to the rigging case, according to another person with knowledge of the matter.
HSBC is the world's sixth-biggest currency trader, according to Euromoney rankings.
In September, HSBC was fined US$175 million by the US Federal Reserve for having "unsafe and unsound" business practices in its foreign-exchange trading business. The Sept 29 order referred to the criminal case against Johnson and Scott as well as a US$275 million penalty the bank paid to the Commodity Futures Trading Commission in 2014 after being accused of using private electronic chat rooms to improperly coordinate trades with other banks.
In another case stemming from the wide-ranging US investigation of currency trading, Robert Bogucki, a former head of New York foreign-exchange trading at Barclays' investment bank, on Wednesday became the lender's third trader to face US charges related to market manipulation.