In the deal, HSBC agreed to a deferred prosecution agreement with the US Department of Justice and reached agreements with other US government agencies. The bank also said it "anticipates finalizing United Kingdom Financial Services Authority shortly," on UK-based money laundering claims.
"We accept responsibility for our past mistakes," Stuart Gulliver, HSBC's chief executive, said in a statement. "Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters," he added.
HSBC rose less than 1% on the New York Stock Exchange in early trading, adding to year-to-date gains in excess of 30%. Currently, the bank's shares sit just below 52-week highs hit earlier in December, in the wake of details of its money laundering settlement.
Although the terms of the settlement represent a record money laundering fine, HSBC's balance sheet indicates the bank was prepared for such an outcome. As of the third quarter, HSBC set aside a $1.5 billion provision to cover a potential settlement and warned that it could face criminal charges and see costs "significantly" exceed the provision.
The New York Times reports US lawmakers were considering a far more punitive enforcement of HSBC's money laundering violations.
According to the report, some prosecutors at the Department of Justice and the Manhattan district attorney's office were pressing for HSBC to plead guilty to criminal charges such as violating the Bank Secrecy Act, citing unnamed sources. Such a guilty plea could have significantly disrupted HSBC's US business; however, the New York Times reports prosecutors would up favoring a host of sanctions and financial penalties over criminal charges.
In August, ratings agency Standard & Poor's downgraded its outlook for HSBC, highlighting the then ongoing money laundering probe as a negative for the bank's long-term business. In particular, S&P indicated any sanctions against doing business in the US could weaken the bank's lending and trade finance in the US.
While the fine is the largest ever for money laundering violations, HSBC's share gains indicate some investors in the bank see the settlement as a positive. Still, HSBC faces a host of legal challenges, even after settling money laundering violations with US authorities.
HSBC will also continue to improve its anti-money laundering compliance and, according to the settlement, the bank will have an independent monitor evaluate the implementation of new controls over a five year period.
On Tuesday, Bank of America Merrill Lynch analyst Michael Helsby highlighted that the settlement puts a floor on HSBC's exposure to anti-money laundering violations, but noted litigation remains a risk for the bank.
"While the settlement with the US authorities may draw a line under these specific AML related issues, HSBC remains subject to a number of significant litigation Issues," wrote analyst Michael Helsby in the report, citing the bank's continued exposure to a $9 billion class action lawsuit related to Bernard Madoff's Ponzi scheme, Libor-related lawsuits, and a $3.5 billion claim tied to practices at its former US lending arm Household, among others.
Helsby gives the bank an underperform rating.
Other European banking conglomerates have also come under scrutiny for violating anti-money laundering controls. On Monday, Standard Chartered (LON:STAN)
In June, ING (NYSE:ING) settled with US authorities over restricted payments to Iran and Cuba for $619 million.
Meanwhile, over a dozen global banks face regulatory fines related to the manipulation of short-term interest rates. In June, Barclays (NYSE:BCS) paid $450 million to settle a host of rate manipulation allegations with global regulators that signaled widespread fraud in the market.