HSBC Holdings will pay a total of $101 million to settle criminal charges that the bank engaged in "front-running" on foreign exchange to defraud two clients in 2010-2011, according to court documents filed Thursday in federal court.
The bank will pay a $63 million criminal penalty and $38 million in disgorgement and restitution to settle the charges under a deferred prosecution agreement in which HSBC accepts responsibility for its employees' actions, the documents said. Under the agreement, HSBC will forgo any criminal charges in the case as long as the bank adheres to the terms of the settlement.
HSBC had been charged in U.S. District Court in New York with two counts of wire fraud in connection with the alleged scheme. The settlement still requires court approval.
HSBC admitted that its FX traders misused confidential information from clients to execute British pound FX transactions on two occasions in 2010 and 2011, with the bank taking in a combined $46 million in profits on the two transactions to the traders' and HSBC's benefit, according to court documents.
HSBC said in a statement on its website it has agreed to take additional steps to enhance its global markets compliance program and internal controls. The bank also agreed to cooperate with regulatory and law enforcement authorities on subsequent investigations.
The settlement payment is the latest by HSBC over foreign-exchange trading issues. In October, the bank was fined $175 million by the Federal Reserve Board for failing to detect its FX traders' misuse of client information. In November 2014, HSBC paid $275 million to the Commodity Futures Trading Commission and $341 million to the U.K. Financial Conduct Authority to settle charges that it manipulated FX benchmark rates.