adminThe extensive report on London-based HSBC Holdings PLC by the Senate Permanent Sub-committee on Investigations also says US regulators knew the bank had a poor system to detect problems but failed to take action.
HSBC executives brushed off complaints from other bank employees, so that the problems persisted for eight years, the report says.
In addition, some HSBC bank affiliates skirted US government bans against financial transactions with Iran and other countries, according to the report.
And HSBC’s US division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaeda and other terrorist groups, the report said.
The sub-committee released the report on Monday ahead of yesterday hearing on the topic. HSBC released a statement saying its executives will offer a formal apology at the hearing.
“We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong,” the statement said.
The US justice department said it is conducting a criminal investigation into HSBC’s operations but declined to confirm that the bank is in settlement talks.
The US investigations follow the Barclays Bank scandal in the UK over manipulated interest rates, which has provoked international outrage over what many view as regulators’ failure to enforce financial regulation.
HSBC’s net income last year was $16.8bn. It operates in about 80 countries around the world. Its US division is among the top 10 banks operating in the United States. It has assets of roughly $210bn in its US operations.
Money laundering takes profits from the trafficking of drugs, arms or other illicit activities and passes them through bank accounts to disguise the illegal activity.
The bank used its US operation as a “gateway” into the US financial system for other HSBC affiliates, Senator Carl Levin, the sub-committee’s chairman, told reporters Monday. Because of lax controls against money laundering, HSBC Bank USA “exposed the United States to Mexican drug money” and other suspicious funds, Levin said.
The report says the drug cartels laundered money through the bank’s US division from 2002 through 2009.
“In an age of international terrorism, drug violence in our streets and on our borders, and organised crime, stopping illicit money flows that support those atrocities is a national security imperative,” Levin said on Monday.
The bank said in its statement that it changed its senior management last year and has made changes to strengthen its compliance with rules to prevent money laundering.
“We . . . recognise that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour,” the statement said.
Levin also blasted the federal agency supervising the bank’s US operations, the Office of the Compt-roller of the Currency. He said the agency “tolerated” HSBC’s weak controls against money laundering for years.
Thomas Curry, who heads the Office of the Comptroller of the Currency, also testied at yesterday’s hearing. — Al Jazeera.
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