By Carrick Mollenkamp
Feb 27 (Reuters) - HSBC Holdings Plc said on Monday it will likely face criminal or civil charges from an expanding investigation into its ties to allegedly illegal money transactions, including some tied to Iran.
The disclosure in a regulatory filing shows the increasingly serious nature of inquiries into the London-based bank's business.
HSBC already is the subject of multiple U.S. law-enforcement probes for ties to illegal money transactions. Monday's filing was the first time the bank disclosed that Iranian transactions are under scrutiny and that it could face a criminal charge.
The bank's HSBC USA Inc unit said investigations are being conducted by the Justice Department, the district attorney in Manhattan, two Treasury department agencies and the Federal Reserve. It said those inquiries were examining "historical transactions involving Iranian parties and other parties subject to" U.S. economic sanctions. Financial institutions doing business in the United States are prohibited from aiding sanctioned countries or banks.
In recent years, the Manhattan district attorney and Justice Department have settled with a number of European banks that operated transfer systems for Iranian clients. Banks aided clients trying to improperly move money by removing, or stripping out, references that could tip off a U.S. bank system to a transaction tied to Iran or another sanctioned state.
HSBC disclosed the new details in a filing with the U.S. Securities and Exchange Commission as part of the bank's 2011 annual results. HSBC USA provides commercial and consumer banking and operates 461 branches. The bank previously said in securities filings that it was facing inquiries and it had received grand jury subpoenas.
Last month, Reuters reported that HSBC was under investigation by a U.S. Senate panel in a money-laundering inquiry. In January, HSBC named former top U.S. Treasury Department official Stuart Levey as its chief legal officer. Levey had specialized in combating terrorism financing before leaving the Treasury Department last year.
In the filing on Monday, HSBC also highlighted the serious nature of the U.S. investigations. It disclosed that it is likely "there will be some form of formal enforcement action, which may be criminal or civil in nature."
In a statement, an HSBC spokesman said: "The change in the disclosure reflects the fact that the investigations have developed over the course of the year, and we can now say that some form of formal enforcement action is likely and that it may be criminal or civil in nature."
The bank suggested in the SEC filing that the U.S. inquiries could result in a deferred prosecution. That type of agreement with prosecutors requires a bank to acknowledge criminal wrongdoing and leaves the door open for further prosecution if more violations occur.
In its filing, the HSBC unit said: "Investigations of several other financial institutions in recent years ... have resulted in settlements. Some of those settlements involved the filing of criminal charges, in some cases including agreements to defer prosecution of these charges, and the imposition of fines and penalties."
HSBC added that the fines and penalties paid by other institutions were "significant." The bank said in the securities filing it is "cooperating fully and engaging in efforts to resolve these matters."
HSBC Reports Being Under Investigation For Illegal Money Transactions Connected With Iran