WASHINGTON Banks are facing heightened investigation and steeper penalties from federal regulators and prosecutors for failure to comply with anti-money-laundering laws, an enforcement trend that may shave billions of dollars off bank balance sheets.
Global banking giant HSBC said Monday that it poured an additional $800 million into its reserves in the third quarter to cover potential fines, settlements and other expenses related to a money laundering probe by the Justice Department and banking regulators. The bank has $1.5 billion set aside, though it believes the costs may significantly exceed that amount.
HSBC is one of several banks, including Citigroup and Standard Chartered, being investigated for allegedly allowing millions of dollars from drug traffickers, terrorists or countries under sanctions to illegally move through the U.S. financial system.
While some of these investigations have been in the works for years, banking attorneys say the level of scrutiny has intensified. Some suspect regulators are reacting to congressional criticism.
Either way, there is a clear difference between the anti-money-laundering enforcement of today and five years ago, said Michael Dawson, managing director of Promontory Financial Group, a financial consulting firm.
“The involvement of the Department of Justice in sanctions and enforcement actions is much greater now than it was five years ago,” he said.