Top banking scandals 2012

BS Reporter / New Delhi December 11, 2012, 16:00 IST

HSBC and Standard Chartered, the two biggest UK banks by market value, are to pay more than $2.5bn in fines as part of record settlements with US authorities over money laundering charges.

HSBC has confirmed it is to pay US authorities $1.9bn in a settlement, the largest paid in such a case.

It was fined for money laundering activities tied to drug cartels in Mexico and terror-linked groups in Saudi Arabia in December 2012.

The bank admitted to a breakdown of controls and apologised in a statement on Tuesday announcing it had reached a deferred-prosecution agreement with the US Department of Justice.

Money laundering is the process of concealing the source of money obtained by illicit means.

The settlement is the third time in a decade that HSBC has been penalized for lax controls and ordered by US authorities to better monitor suspicious transactions.

According to Quartz, it will take HSBC a mere 41 days to earn back the $1.9 billion fine.

On Monday, StanChart agreed to pay $327m to several authorities in the US to settle charges it violated US sanctions law and impeded government inquiries. 

That sum comes on top of the $340m the UK bank agreed to pay in August to New York state’s Department of Financial Services.

It was fined on August and December 2012 for violating US curbs on transactions with Iran, Burma, Libya and Sudan.

Business Standard presents a list of the most infamous banking scandals of 2012

1) Barclays CEO Bob Diamond resigns after rates scandal

1) On 03 July,  Barclays Plc Chief Executive Bob Diamond resigned, the highest-profile casualty of an interest rate-rigging scandal that spans more than a dozen major banks across the world. "The external pressure placed on Barclays has reached a level that risks damaging the franchise - I cannot let that happen," Diamond said in a statement.

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2) JPMorgan reveals shock loss of $2bn

In May, JPMorgan Chase disclosed that it had lost more than $2 billion in trading. Jamie Dimon, the chief executive of JPMorgan, blamed “errors, sloppiness and bad judgment” for the loss, which stemmed from a hedging strategy that backfired.

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3) The Libor saga

Barely a week after London-based Barclays Bank Plc was fined a record £290 million (Rs 2,500 crore), for allegedly participating in the fixing of the London Interbank Offered Rate, or Libor, by regulators in the US and the UK, its chairman Marcus Agius and outspoken CEO Robert Diamond have finally resigned.

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4) Nomura chief quits over insider trading
In July, chief executive of Japan's Nomura Holdings Kenichi Watanabe resigned following a damaging insider-trading scandal. It was alleged that staff leaked information on share offerings to customers before it was made public.

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On November 03, Nomura faced another major more legal problems. Nomura said it was likely involved in a new insider trading case, months after the firm’s CEO, Kenichi Watanabe, resigned following similar charges.

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5) Lloyds executive quits over funds bungling charges

A senior banker at the Lloyds TSB has resigned following claims that millions of pounds were channelled to companies set up by a pair of young Indian men he befriended. Andrew Taylor, 46, quit citing 'ill health' as auditors were sent in to probe the accounts of a firm controlled by the two colleagues - Vijay Bhaskar and Raj Kumar.

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6) Loss due to technical glitch

In August, media reported that Royal Bank of Scotland (RBS) kept aside £125m to pay compensation to customers affected by the recent breakdown in its computer systems. Account holders at RBS and its NatWest and Ulster Bank subsidiaries faced disruption for up to two weeks in June after a software upgrade at the bank.

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7) Big Four admit to mis-selling interest rate swaps

In June, Britain’s four main high street lenders have agreed to compensate small and medium sized businesses mis-sold interest rate hedging products after the Financial Services Authority said it had found “serious failings” in the way they marketed to some customers.  Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland have all agreed to immediately halt the sale of complex interest rate hedges to smaller businesses and have pledged to compensate potentially thousands of customers.

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8) In June, ING Group was charged for covering up fund transfers in violation of US sanctions against Cuba and Iran

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9) In February 2012, Bank of America was fined for charging discriminatory lending rates to African American and Latino borrowers.