Mexico's Sinaloa cartel and Colombia's Norte del Valle cartel between them laundered $US881 million through HSBC and a Mexican unit, the US Justice Department said.
In a deferred prosecution agreement with the Justice Department, the bank acknowledged it failed to maintain an effective programme against money laundering and failed to conduct basic due diligence on some of its account holders.
Under the agreement, which was reported by Reuters last week, the bank agreed to take steps to fix the problems, forfeit $US1.256 billion, and retain a compliance monitor. The bank also agreed to pay $US665 million in civil penalties to regulators including to the Office of the Comptroller of the Currency, the Federal Reserve, and the Treasury Department.
"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organization from the one that made those mistakes," HSBC Chief Executive Stuart Gulliver said.
HSBC's money-laundering lapses in Mexico and elsewhere were cited in an extensive Senate report earlier this year, but the documents filed in court provided new details.
Despite the known risks of doing business in Mexico, the bank put the country in its lowest risk category, which excluded $US670 billion in transactions from the monitoring systems, according to the documents.
Bank officials repeatedly ignored internal warnings that HSBC's monitoring systems were inadequate, the Justice Department said. In 2008, for example, the CEO of HSBC Mexico was told that Mexican law enforcement had a recording of a Mexican drug lord saying that HSBC Mexico was the place to launder money.
Mexican traffickers used boxes specifically designed to the dimensions of an HSBC Mexico teller's window to deposit cash on a daily basis.
The agreement also described a vastly understaffed compliance department. At times, only one to four employees were responsible for reviewing alerts identifying suspicious wire transactions. When HSBC processed bulk cash, a business it calls Banknotes, only one or two compliance officials oversaw transactions for 500 to 600 customers, the Justice Department said.
Compliance was "woefully inadequate," Loretta Lynch, the US Attorney in Brooklyn, said at a press conference.
