11/12/2012 04:59 GMT

HSBC Settles $1.9bn For Aiding Drug Lords, Terrorists And Rogue States

HSBC will pay US regulators $1.9bn (£1.9bn) as a settlement after it was found to have laundered money for drug cartels, terrorists and so-called rogue states.

Britain's biggest high street bank hit the headlines in July after it was revealed HSBC had given access to the US's financial system to known Mexican drug lords and pariah nations, including Iran.

Stuart Gulliver, HSBC chief executive, said in a statement on Tuesday: "We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again."

The US department of justice has formally recognised Gulliver's claims that the bank is "fundamentally different" to the one which allowed the dubious accounts and money laundering to take place.

In the Deferred Prosecution Agreement, the department of justice wrote: "Management has made significant strides in improving 'tone from the top' and ensuring that a culture of compliance permeates the institution. The efforts of management have dramatically improved HSBC Bank USA's and HSBC Group's Bank Secrecy Act / Anti-Money Laundering and Office of Foreign Assets Control compliance programs."

HSBC's head of group compliance, David Bagley, resigned during the summer after the damage caused by the headlines to the bank - HSBC was accused of facilitating money for terrorists, drug lords and concealed transactions that bypassed US sanctions against Iran.

The investigation into HSBC took more than a decade - Senators Carl Levin and Tom Coburn, who lead the investigative hearing in July at which Bagley resigned, said the permanent subcommittee of investigations had examined 1.4m documents as part of its review and thanked the bank for its co-operation.

HSBC's Mexican operations reportedly moved £7bn into the bank's US operations, and according to its own staff, much of that money was tied to drug traffickers.

Particular anger was directed at a Cayman Islands subsidiary set up by the Mexico division of HSBC, which handled 50,000 client accounts and £2.1bn in holdings, but had no staff or offices. Money from the Cayman Islands was used to buy planes for Mexican drug traffickers, according to a report put together by the senators.

Huff Post UK's political director Mehdi Hasan suggested the admission by HSBC is likely to put pressure on the bank’s former chairman, Lord Green, who is now a Conservative trade minister.

"The scandal cost the bank's head of compliance David Bagley his job. But Green escaped largely unscathed despite having been in charge of the bank at the time the transgressions are said to have taken place," he wrote.