Go to the GCPD and interrogate the Mad Hatter.
Follow the way point to the island with the large statue where you will hear the sirens.
One hostage is located behind the statue (about at the coordinates 2567, 2223). Another is on the crane near the ACE chemical plant (about at the coordinates 1345, 2055). And a third is near merchant bridge (about at the coordinates 1479, 3330).
Diffuse the bomb by moving the beams over the dots until they turn green. The achievement pops after you diffuse the bomb.