The government alleges that HSBC intentionally allowed prohibited transactions with Iran, Libya, Sudan and Burma. The federal government also said the bank facilitated transactions with Cuba in violation of the Trading With the Enemy Act.
The documents say the prohibited transactions with Iran, Libya, Sudan and Burma took place from 2001 through 2006.
In regard to the Mexican drug traffickers, the bank HSBC USA failed to adequately monitor over $9.4 billion from HSBC Mexico.
The British banking giant on Tuesday issued an apology
"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again," said Stuart Gulliver, group chief executive of HSBC.
The government's allegations come as HSBC says it has agreed to pay $1.92 billion to settle the U.S. money-laundering probe. The bank announced on Tuesday that "under these agreements," HSBC will "continue to cooperate fully with regulatory and law enforcement authorities."
The U.S. stopped short of charging executives, citing the bank's immediate, full cooperation and the damage that an assault on the company might cause on economies and people, including thousands who would lose jobs if the bank collapsed.
Outside experts said it was evidence that a doctrine of "too big to fail," or at least "too big to prosecute," was alive and well four years after the financial crisis.
The settlement avoided a legal battle that could have further savaged the bank's reputation and undermined confidence in the banking system. HSBC does business in almost 80 countries, so many that it calls itself "the world's local bank."
HSBC even instructed an Iranian bank in one instance how to format messages so that its financial transactions would not be blocked, Breuer said at a news conference announcing the settlement.
"The record of dysfunction that prevailed at HSBC for many years is simply astonishing," Breuer said.
For the government not to go a step further and prosecute was "beyond obscene," said Bill Black, a former U.S. regulator for the Office of Thrift Supervision who now teaches at the University of Missouri-Kansas City.
"Regulators are telling us, `Yes, they're felons, they're massive felons, they did it for years, they lied to us, and they made a lot of money ... and they got caught red-handed and they're gonna walk.'"
Court documents showed that the bank let over $200 trillion between 2006 and 2009 slip through relatively unmonitored, including more than $670 billion in wire transfers from HSBC Mexico, making it a favorite of drug cartels and money launderers.
HSBC Bank USA at the time rated Mexico in its lowest risk category.