HSBC Holdings has agreed to pay a total of nearly $2 billion infines stemming from violations of the Bank Secrecy Act and U.S. sanctions.

The British-owned bank allowed hundreds of millions of dollarsto flow from Mexican drug traffickers into the U.S., according tothe U.S. Justice Department, and also violated sanctions laws byconducting business with Iran, Libya, Sudan, Burma and Cuba.

The bank's breakdowns in anti-money laundering complianceallowed the funds to flow from Mexico in accounts in the UnitedStates, the Treasury said Tuesday in a release. The Treasury'sportion of the multi-agency settlement totaled $875 million.Additional settlements were reached with the Manhattan districtattorney in New York and with the Federal Reserve.

The Treasury said the penalties reflect the damage to theintegrity of the U.S. financial system inflicted by HSBC, and thefederal government's intolerance of behavior and business practicesthat disregard BSA requirements and U.S.-sanctioned regimes.

“These settlements implicate willful and dangerous practices byone of the world's biggest banks,” said Under Secretary forTerrorism and Financial Intelligence David S. Cohen. “HSBCabsolutely knew the risks of the business it pursued, yet itignored specific, obvious warnings.”

Since at least mid-2006, the Treasury said the bank lacked aneffective risk-based AML program reasonably designed to managerisks of money laundering or other illicit activity, given thebank's products, services, transaction volume, scope of businessactivities, geographic reach, and customers.

The Treasury's settlement included the Office of the Comptrollerof the Currency, the Financial Crimes Enforcement Network and theOffice of Foreign Assets Control, all divisions of the TreasuryDepartment.

The OCC and the FinCEN announced separate assessments of $500million. The OCC fine is being levied for failure to complyfully with a remedial order addressing these violations, issued in2010.

OFAC also reached an additional $375 million agreement with HSBCto settle potential liability for the sanctions violations.

From 2002 until 2009, the Treasury said HSBC rated Mexico ashaving “standard” money laundering risk, the lowest of the bank'sfour possible country risk ratings.

As a result of the ratings, hundreds of billions of dollars inwire transactions from Mexico were excluded from the bank'sinternal AML reviews. Additionally, from 2006 through 2009, thebank did not monitor bulk cash transactions conducted with itsMexican and other foreign affiliates and took delivery of more than$15 billion in cash.

In 2006, FinCEN alerted all U.S. financial institutions aboutmoney laundering risks associated with United States/Mexicocross-border cash and warned that cash from illegal drugtrafficking was being smuggled into Mexico, placed into financialinstitutions, and then returned to the United States.

HSBC also maintained correspondent accounts for affiliatesaround the world and did not collect or maintain, as the BSArequires, any customer due diligence information regarding theserelationships. As a consequence, many foreign financialinstitutions and their customers effectively gained unmonitoredaccess to the U.S. financial system without appropriate safeguardsagainst illicit financial activity.