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HSBC warns on Brexit challenge amid profits slump and new FCA probe

HSBC has revealed it is facing a UK probe over money laundering rules, as it published results warning of the challenges posed by Brexit and Donald Trump.

The disclosure about a new investigation by the City watchdog shows how the banking giant is still mired in allegations about past behaviour at the same time as being shaken by recent political earthquakes.

HSBC reported a 62% fall in pre-tax profits for 2016 to $7.1bn (£5.7bn), while it swung to a loss of $3.4bn (£2.8bn) for the final quarter of the year. London-listed shares closed 6.5% down.

The bank confirmed that the vote to leave the EU meant it "may need to relocate some 1,000 roles from London to Paris progressively over the next two years, depending on how negotiations develop".

Chairman Douglas Flint revealed how the bank had been affected by "largely unexpected economic and political events" which had helped create "volatile financial market conditions".

But he added that the bank's performance against this background was "broadly satisfactory".

The results were published at the same time as HSBC's annual report, which disclosed that the bank was being investigated by the Financial Conduct Authority (FCA) "into its compliance with UK money laundering regulations and financial crime systems and control requirements".

The FCA declined to comment.

HSBC is already under close scrutiny from US authorities after a settlement in 2012 which saw it agree to being subject to an independent monitor and pay a $1.9bn fine for breaching money laundering and sanctions laws.

Chief executive Stuart Gulliver said the monitor had "raised certain concerns" but added: "We have continued to progress and our commitment remains unwavering."

The bank's remuneration report revealed that part of Mr Gulliver's pay package and that of two other directors was reduced "based on feedback received from the monitor". He was still paid £5.7m for the year.

It also revealed that HSBC's bonus pool for the year was cut by $194m to reflect fines, penalties and customer compensation.

In addition "certain individuals" saw their bonuses cut by a total of $12.1m "to reflect their involvement in certain notable events and individual transgressions".

HSBC's fall in profits was largely blamed on one-off accounting costs, including a write-down of its global private banking division in Europe and the impact of the sale of its Brazil business.

The bank has upgraded forecasts for economic growth reflecting the robust performance of the US economy and China holding up well, though it said these were only partial reversals of earlier downgrades made "after uncertainty was elevated as a result of the unexpected political events".

But it highlighted risks including European elections - as France's far-right presidential candidate Marine Le Pen gains traction in polls.

It also pointed to "possible protectionist measures from the new US administration impacting global trade" in addition to "uncertainties facing the UK and the EU as they enter Brexit negotiations".

Chairman Douglas Flint said: "2016 will long be remembered for its significant and largely unexpected economic and political events.

"The uncertainties created by such changes temporarily influenced investment activity and contributed to volatile financial market conditions."