In the largest Money laundering settlement ever, HSBC, the UK-based banking giant, has agreed to pay US authorities $1.9 billion dollars for its involvement in money laundering. It’s alleged that HSBC helped launder money of drug cartels in states that were under US sanctions. Following a US Senate investigation, HSBC admitted that in fact, it had poor controls on money laundering. The settlement announcement, which is forthcoming, was agreed upon after the Senate report was released. In the report, it’s suggested that HSBC accounts in the US and Mexico were being used as money laundering accounts. The report cited a number of examples including a $7 billion dollar transfer between Mexico and US accounts in 2007 and 2008. The transfer of billions of dollars points to HSBC’s complicity, not simply poor policies. It continued, pointing to the fact that HSBC allowed these transfers despite the fact Mexico is known for its drug smuggling. It also accused HSBC of regularly “circumventing restrictions on dealings with Iran, North Korea, and other states under US sanctions”. Whatever the reasons, there’s no question such violations hurt the integrity and effectiveness of the sanctions. HSBC has announced it had hired Bob Werner, who previously headed the US treasury’s Office of Foreign Asset, the agency responsible for enforcing US sanctions. It’s unclear how the settlement will affect the operations of HSBC but with a pre-tax profit of $12.7 billion dollars for the first six months of 2012, the settlement is unlikely to hurt profits long-term, or the stock price.