U.S. banks can expect to face significant tougher regulatory scrutiny of their efforts to prevent money laundering, which will likely lead to higher compliance costs, says Fitch Ratings.

In the wake of last week’s Senate subcommittee hearings into alleged lapses in anti-money laundering compliance at HSBC, Fitch expects that many U.S. banks will now face ramped up regulatory scrutiny. It notes that other U.S. banks, including Citibank, have recently been forced by regulators in the United States and overseas to comply more closely with anti-money laundering statutes.

For example, the rating agency reports that last week, Old National Bank, an Indiana-based lender, disclosed that it has entered into a stipulation to a consent order issued by the Office of the Comptroller of the Currency (OCC) over the need to step up compliance with anti-money laundering regulations. As a result, it will be required to implement a program to identify risks, focusing on the need to improve risk management processes in obtaining and analyzing customer due diligence information.

“We expect the OCC and potentially other regulatory bodies to increase the visibility of… regulatory oversight as a result of the HSBC investigation,” it says, adding that other banks face heightened scrutiny of their efforts to identify customers that may be involved in money laundering.

The high profile nature of these investigations may ultimately result in fines levied against some banks, it says. And, it expects regulatory costs to increase too, as banks re-evaluate their compliance efforts.

“We note that these costs are significant, but manageable for large banks like HSBC. Compliance costs can be larger on a size-adjusted basis, and potentially material from a credit quality perspective for some smaller banks,” it says; adding, “We expect that these and other regulatory costs, particularly those associated with the growing burden of Dodd-Frank Act rules and international capital and liquidity regulations, will continue to weigh on overall bank profitability over the near to intermediate term.”