HSBC Bank USA will open a D.C. branch by the end of November in a bid to replace Riggs Bank as the city's premier diplomatic bank.

Riggs, which decided in April to jettison its more than $1 billion in local embassy accounts, has agreed to refer its embassy clients to HSBC, a sprawling global institution with headquarters in London.

"As Riggs previously disclosed, the company is in the process of winding down its embassy banking business," Riggs spokesman Mark N. Hendrix said. "As a service to our remaining embassy clients, Riggs is working closely with HSBC to ensure a smooth transition."

Riggs decided to shut down its embassy banking business under pressure from federal regulators concerned about the bank's failures to comply with laws designed to deter money laundering. Riggs subsequently was fined a record $25 million for failing to report suspicious financial transaction involving foreign customers, including the governments of Saudi Arabia and Equatorial Guinea.

A Treasury source and several local industry sources, who spoke on condition of anonymity because they are barred from publicly discussing bank/client relationships, said embassies have for the most part been able to find other banks. Citibank, Wachovia and Bank of America Corp. each have picked up some relationships.

One small community bank, Congressional Bank in Potomac, also has picked up a few small embassy relationships, according to John R. Lane, its president, who would not say which embassies are clients. Lane said Congressional isn't targeting embassy clients as a big part of its business, however.

An HSBC spokeswoman said no Riggs employees have been hired for its effort, which will be based out of a branch at 1130 Connecticut Ave. NW, just a few blocks south of the Riggs Dupont Circle branch, which handled embassy business for more than two decades.

HSBC's U.S. banking operations are concentrated in New York, where it has nearly 400 branches. This will be its first Washington area retail presence.

It will not, however, be its first involvement with a Riggs embassy customer. HSBC affiliates in Luxembourg and Cyprus held accounts of two companies that received suspicious wire transfers out of a massive state oil revenue account at Riggs opened by Equatorial Guinea. When Riggs officials asked HSBC to identify the beneficiaries of the accounts in February, HSBC declined, citing bank secrecy laws in those countries.

HSBC officials said they have been meeting with banking regulators "for some time" about starting an embassy banking business here and "are confident we can meet all the necessary regulatory standards required and will only maintain relationships that meet our high compliance standards," according to a statement provided by Brendan McDonagh, senior executive vice president of retail and commercial banking for HSBC.

HSBC has affiliates in 76 countries, including several jurisdictions, such as Cyprus, Luxembourg and the Channel Islands, that have strict bank secrecy laws considered by U.S. authorities to be impediments to "know your customer" rules designed to prevent international money laundering. Its inability to disclose customer information to Riggs because of another country's laws was cited by the Senate permanent subcommittee on investigations, in a July report on Riggs, as a significant weakness in U.S. anti-money-laundering rules.

HSBC spokeswoman Kathleen Rizzo Young said the bank has "rigorous" anti-money-laundering controls at its affiliates worldwide and will follow regulations closely.

HSBC was among a number of major banks that met in June with Treasury officials who were encouraging banks to step in after Riggs told more than 100 embassy customers they had to find another bank. Other area banks considered the business as too risky to take up, and embassies had trouble finding banks that would open accounts for them.

Riggs, which agreed to be acquired by PNC Financial Services Group Inc. of Pittsburgh for about $766 million, must exit its embassy business as a condition of the merger. Of Riggs's $4.2 billion in deposits at the end of 2003, $1 billion, or 23 percent, was in embassy banking. Riggs has less then $200 million in embassy clients deposits left, and what remains will likely be gone within 30 days, according to a source familiar with the matter who spoke on condition of anonymity.

HSBC, like Riggs, is regulated by the Office of the Comptroller of the Currency. While he did not comment on HSBC specifically, OCC spokesman Robert M. Garsson said embassy banking "represents a heightened level of risk and we will apply a heightened level of scrutiny" to banks that do it.