Europe's largest bank by market value will pay $1.9 billion in fines to settle money laundering allegations by US regulators, according to sources familiar with the matter.

US State and Federal authorities decided against indicting HSBC in a money laundering case over concerns that criminal charges could jeopardize Europe's largest bank by market value and ultimately destabilise the global financial system.

Instead, people familiar with the matter said HSBC is expected to pay $1.9 billion to settle accusations that it allowed itself to be used by drug cartels in Mexico and terrorist financiers in the Middle East.

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Under what is known as a deferred prosecution agreement, which means the bank won't be prosecuted any further if it meets certain conditions such as strengthening its internal controls, HSBC will also admit to both money laundering lapses and US sanctions violations on Tuesday.

HSBC Group Chief Executive, Stuart Gulliver, said:

We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again. The HSBC of today is a fundamentally different organisation from the one that made those mistakes. Over the last two years, under new senior leadership, we have been taking concrete steps to put right what went wrong and to participate actively with government authorities in bringing to light and addressing these matters.

As recently as Monday, HSBC named Robert Werner, a former Treasury Department official who specialised in money laundering and sanctions violations, as the bank's head of financial crime compliance. Werner joined the bank in August.

Standard Chartered Bank, another British bank, on Monday agreed to pay $372 million to US authorities to settle allegations it violated US sanctions law and impeded government inquiries.

The penalty comes on top of the $340 million the UK bank agreed to pay in August to New York State Department of Financial Services.

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The settlements, in combination, amount to more than $2.5 billion, making one of the heftiest fines in the industry amid a crackdown in the United States.

Other banks caught up in the US sanctions probe include Lloyds Banking Group and Barclays Plc in Britain, Credit Suisse Group in Switzerland and Dutch banks ABN Amro Holdings NV and ING Bank NV.

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