NEW YORK — U.S. authorities announced Tuesday that British bank HSBC has agreed to pay $1.9 billion to settle a probe in connection with the laundering of money from narcotics traffickers in Mexico.

The move avoids a legal battle that could further savage the bank's reputation and undermine confidence in the global banking system.

At least $881 million in drug trafficking proceeds was laundered through HSBC Bank USA, violating the Bank Secrecy Act, U.S. authorities said.

The government also alleges HSBC intentionally allowed prohibited transactions with Iran, Libya, Sudan and Burma. The bank also facilitated transactions with Cuba in violation of the Trading With the Enemy Act, according to court documents.

"HSBC is being held accountable for stunning failures of oversight — and worse — that led the bank to permit narcotics traffickers and others to launder hundreds of millions of dollars through HSBC subsidiaries and to facilitate hundreds of millions more in transactions with sanctioned countries," Assistant Attorney General Lanny A. Breuer said in a statement.

HSBC Chief Executive Stuart Gulliver said the bank accepts "responsibility for our past mistakes."

"We have said we are profoundly sorry for them, and we do so again," he said.

Analysts said the Britain-based bank will be able to absorb the cost of the settlement.

"The certainty is clearly welcome and helps to draw a line under the situation," said Shore Capital analyst Gary Greenwood. "In terms of knock-on effects, we think it is likely to lead to higher ongoing compliance costs and perhaps some minor loss of business in the U.S., but nothing that will be particularly material."