Belfast Telegraph

HSBC reveals it faces financial crime controls probe as it posts profit down 62%

Banking giant HSBC has revealed it is facing a UK investigation over money laundering controls as it posted a worse-than-expected 62% profits slump.

The lender said the Financial Conduct Authority (FCA) launched a probe at the end of last year into HSBC's financial crime compliance, with the group remaining under pressure on both sides of the Atlantic after its £1.2 billion US money laundering fine nearly five years ago.

The announcement came as it said pre-tax profits tumbled to 7.1 billion US dollars (£5.7 billion) last year amid "volatile" trading caused by the Brexit vote and President Donald Trump's election.

It blamed the profits dive on a string of one-off charges, such as the sale of its Brazilian operations, as well as hefty write-downs from a restructuring.

In its annual report published alongside the results, HSBC said the FCA was investigating the bank's " compliance with UK monetary laundering investigations and financial crime systems and control requirements".

It confirmed the FCA has launched an enforcement action against the group, which can result in potential fines, while it added US regulators also remain concerned over the bank's measures to improve anti-money laundering defences.

HSBC's shares dived by as much as 7% after its annual results, branded "disappointing" by City experts.

It also sparked share falls for rivals as the figures - the first from the major UK players - raised fears of a worse-than-expected annual results season for the sector.

Chief executive Stuart Gulliver said he would "leave no stone unturned" as he looks to bring the bank's financial crime controls up to scratch.

But the annual report showed pay deals for top bosses were amended after concerns were raised into its progress on financial crime controls by the so-called monitor - posted to HSBC's offices as part of a deferred prosecution agreement following its 2012 fine.

Despite this, Mr Gulliver's like-for-like potential pay package rose to £7.7 million for 2016 from £7.3 million in 2015.

HSBC cut its overall 2016 bonus pool for staff by 12.3% to three billion US dollars (£2.4 billion), although it said 245 staff earned more than £1 million in 2016.

Outgoing chairman Douglas Flint insisted the group's performance was "broadly satisfactory" in the face of "volatile market conditions", but warned over the impact of Donald Trump's protectionist stance and the "threat of populism".

He said: "2016 will be long remembered for its significant and largely unexpected economic and political events.

"These foreshadowed changes to the established geopolitical and economic relationships that have defined interactions within developed economies and between them and the rest of the world."

He added that 2017 will bring a raft of possible threats, with European elections and the Brexit negotiations adding to uncertainty.

The group reiterated that 1,000 jobs may have to move from London to Paris over the next two years depending on the outcome of Brexit negotiations.

Mr Gulliver played down the impact, saying that half of the affected staff are French nationals who will "simply return home" and adding that London will "remain the dominant financial centre in this time zone" regardless of Brexit.

The group also ramped up its cost cutting drive by another 1 billion US dollars (£805 million) to around 6 billion US dollars a year (£4.8 billion).

Mr Gulliver cautioned there "clearly will be an impact on the workforce", but said the increased cost savings will not come from job losses.