* HSBC to pay 40 mln Sfr to settle Geneva probe
* Payment for past organisational deficiencies at Swiss unit
* One of a number of investigations facing Swiss privatebank (Adds detail, comment from the Geneva prosecutor)
By Joshua Franklin and Stephanie Nebehay
ZURICH/GENEVA, June 4 (Reuters) - HSBC agreed onThursday to pay Geneva authorities 40 million Swiss francs ($43million) to settle a money laundering investigation at its Swissprivate bank, one of a number of probes facing its Geneva-basedwealth manager.
Leaked files published earlier this year sparked allegationsthat HSBC's private bank may have enabled clients to concealmillions of dollars of assets and dragged Europe's largestlender into the sights of regulators including Geneva's publicprosecutor.
Following four months of inquiries, Geneva authorities saidthey had closed their investigation after HSBC agreed to pay 40million francs for wrongdoing, the largest such figure imposedby local prosecutors.
"HSBC for several years suffered organisational deficienciesin the fight against money laundering," Geneva's chiefprosecutor Yves Bertossa told a news conference.
Its business handling Mediterranean and Israel-based fundswas at the heart of the investigation which focused on fourclients after documents were seized, he said, giving no details.
Olivier Jornot, Geneva's attorney-general, told reporters:"This affair shows the weakness of Swiss law in fighting theentry of criminal funds into the financial circuit."
"It's easy to ask public prosecutors afterwards to carry outtitanic investigations. But on the other hand when we have a lawthat practically doesn't punish intermediaries accepting moneyof dubious origin, there is a problem."
A source close to the case said that the Geneva authoritiesdecision to reach a settlement was based on "judicialrealpolitik".
The bank said in a statement that no criminal charges wouldbe filed and that neither the bank nor its employees weresuspected of any current criminal offences.
HSBC's Swiss arm is still facing investigations by U.S.,French and Belgian authorities.
The Swiss unit has been in the spotlight ever since a formerIT employee Hérvé Falciani fled Geneva in 2008 with files whichwere alleged to show evidence of tax evasion by its clients.
HSBC has apologised to customers and investors over theprevious failings of its Swiss business and has said theoperation has since been overhauled.
It said the Geneva prosecutor had acknowledged the progressthe bank had made in recent years.
Switzerland's financial markets regulator FINMA had alreadyfound fault with HSBC in 2010-2011 for its poor internalcontrols and violations of money laundering guidelines.
($1 = 0.9297 Swiss francs) (Editing by Keith Weir)