HSBCAnthony Devlin/PA Wire/Press Association Images

HSBC has been caught up in a massive probe into money laundering in the US. It is due to attend a Senate hearing next week, and ahead of the hearing, speculation is rife that the penalties may be enormous.

So what has it been doing?

The problem

The investigation refers to transactions made between 2004 and 2010. There are questions as to whether some transactions in some parts of the group could have been susceptible to money laundering, and the Senate is particularly interested in whether terrorists and other criminals could have taken advantage of this in the financing of their activities.

An internal memo, leaked in Hong Kong and reported by the FT, was from Stuart ­Gulliver, chief executive. He wrote: "Between 2004 and 2010, our anti-money laundering controls should have been stronger and more effective, and we failed to spot and deal with unacceptable behaviour."

He added that it was "right that we be held accountable and that we take responsibility for fixing what went wrong".

The impact

It emerged during a wider senate probe into banking activities in the US. Gulliver also indicated that he expected there to be further issues discussed as the investigation continues.

Speculation has been rife as to the size of the financial penalty HSBC is expected to pay, and some have said it could even be as much as $1 billion.

The bank itself said in its annual report: "We reflect that in 2011 we continued to deal with legacy regulatory, legal and reputational issues which remind us that our good work can be destroyed by lapses of judgement or control."

The report added: " It is likely that there will be some form of formal enforcement action which may be criminal or civil in nature in respect of some or all of the ongoing investigations." and that "As matters progress, it is possible that any fines and/or penalties could be significant."

Gulliver said in the report: "We are putting a new emphasis on values at HSBC, so that our employees are empowered to do the right thing and to act with courageous integrity."

It has also stepped up its spend on compliance and reorganised global operations to ensure greater oversight.

Horses and stable doors spring to mind