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HSBC exposed: Drug money banking, terror dealings


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lol @ $1 Billion slap-on-the-wrist

HSBC exposed: Drug money banking, terror dealings


International banking giant HSBC may have financed terrorist groups and funneled Mexican drug money into the US economy through its lax policies, a damning Senate report reveals. The bank’s bosses have apologized for the misconduct.

David Bagley, HSBC’s Head of Group Compliance, admitted during a Senate subcommittee hearing that the company had made a number of lapses, adding that he planned to resign.

I recognize that there have been some significant areas of failure,” Bagley told the US Senate Permanent Subcommittee on Investigation. I have said before and I will say again: despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators.”

Irene Dorner, CEO and President of the bank's American operation (HBUS), told the panel that HSBC deeply regrets the lapses in oversight, apologizing for the company's mistakes.

Senator Carl Levin, the chairman of the subcommittee, gave details of one such intricate scheme to launder cash between 2006 and 2009.

Because our tough AML (anti-money laundering) laws in the United States have made it hard for drug cartels to find a US bank willing to accept huge unexplained deposits of cash, they now smuggle US dollars across the border into Mexico and look for a Mexican bank, or ‘casa de cambio’ to take the cash.,” Levin noted. Some of those casas de cambio had accounts at HB Mexico, which, in turn, took all the physical dollars that it got, transported them by armored car or aircraft back across the border to HBUS for deposit in its US Banknotes account, completing the laundering cycle.

The Senator welcomed HSBC’s apologies, but said it also had to be held accountable. He called on the bank to consider shutting down its Mexican affiliate, as well as other banks suspected of providing funding for terrorists.

Earlier, Levin said the culture at HSBC was pervasively polluted for a long time.

The findings are the results of a year-long Senate probe into HSBC’s activities, highlighting systemic negligence throughout the bank’s international structure. The probe was published in a 340-page report in Washington on Tuesday.


Financing terror and flouting the rules

HSBC’s activities in Saudi Arabia were brought into question in the report, specifically referencing banking with Al Rajhi Bank. The investigation claims the Saudi bank has links to financing terrorism based on evidence gathered after the September 11 attacks.

Information collated by investigators suggests one of Al Rajhi’s founders was an “early financial benefactor of al-Qaeda.”

HSBC forbade its affiliates from doing business with the Saudi bank in 2005, but this policy was overturned only a few months later when the banks resumed dealings.

In addition, the report cites dealings with two Bangladeshi banks thought to have links with terrorist organizations.

"From an oversight perspective, the failure of accountability here is dramatic," Senator Levin commented.

The probe also details how the bank bypassed US safeguards that protect against transactions potentially involving terrorists, drug lords, and rogue regimes. The investigations committee alludes to almost 25,000 transactions to Iran amounting to over $19 billion conducted through the bank's US office over a period of seven years. The bank did not disclose that the funds were being sent to Iran.



The reports cities HSBC’s activities in Mexico, highlighting the fact that the country was treated as a long-risk client despite being a known hub for drug trafficking and money laundering.

It gives reference to the banking conglomerate’s Mexican affiliate transporting a total of $7 billion in hard cash to HBUS from 2007 to 2008. The sheer quantity of capital transferred raised concerns that some of it came from illegal drugs sales in the US.

The report also implicates the Office of the Comptroller of the Currency (OCC), a US financial regulator, for failing to regulate HSBC’s activities.

The OCC reported multiple failings on the part of HSBC in 2010 to implement anti-money laundering measures, namely its failure to monitor $60 trillion in bank transfers and 17,000 account alerts detailing suspicious activity.

The Senate report lays the blame for HSBC’s negligence over the past six years partly at the feet of the OCC for its lack of action in spite of consistent evidence of the banks money laundering issues.

"We have learned a great deal working with the subcommittee on this case history and also working with US regulatory authorities, and recognize that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behavior,” HSBC said in a statement. The bank also emphasize that they had already taken “concrete steps” to address the issues including drastic changes to “strengthen compliance, risk management and culture."

The new report comes after the UK’s largest bank revealed it would have to pay a $1 billion fine to US authorities for money laundering offenses committed between 2004 and 2010.


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'Invisible' minister who ran HSBC dodges questions over scandal

Lord Green urged to explain how much he knew about shamed bank's money laundering

Britain's Trade Minister, Lord Green, is under mounting pressure to reveal what he knew about the money laundering scandal at HSBC when he was the bank's chief executive and chairman.

Lord Green was branded "the invisible man" yesterday as the bank was also implicated in the interest rate fixing scandal which has rocked the City of London. Labour said Lord Green should make an urgent statement in the House of Lords after evidence emerged in a US Senate inquiry that he was told in 2005 about the money laundering affair.

Labour seized on an email sent to Lord Green by David Bagley, HSBC's chief compliance officer, who resigned this week over allegations that the bank inadvertently allowed the laundering of drug and terrorist money.

Ed Miliband, the Labour leader, said people were appalled by the "shocking" allegations. "I think the very least he needs to do is come and answer questions about it," he said.

HSBC and Lord Green's problems were compounded after it emerged that the bank is one of four under scrutiny as watchdogs probe a ring of traders who conspired to fix Euribor interest rates, based on what eurozone banks are paying to borrow from each other.

Yesterday Philippe Moryoussef was named as the trader at the centre of a ring while working for Barclays which involved four other banks, including HSBC. They are said to have conspired to fix Euribor rates to boost their trading books, though these allegations have not been substantiated. The other banks were Deutsche Bank, Crédit Agricole and Société Gé*érale, but the final two claim that no wrongdoing has been found at their banks – piling more pressure on HSBC.

A former trader at Crédit Agricole was suspended from trading by his current employer, Lombard Odier, pending investigation into Euribor allegations, the Swiss bank said.

News that HSBC has been implicated in that affair will raise more questions about the tenure of Lord Green, who had overseen HSBC investment bank, as the head of the business. Although the Commons is in recess, the Lords is sitting until Wednesday and Labour argues that the Trade Minister has a duty to appear before then.

"He is the invisible man," a Labour source said. "His submarine strategy of staying below the surface won't work." Last night Lord Green was spotted in the House of Lords, where he is believed to have met with Lord Strathclyde, the Tory Leader of the House.

Mr Bagley told Lord Green, then HBSC chief executive, in January 2005 that "senior persons within the compliance function fabricated records of certain anti-money laundering meetings".

In 2008, as the bank's executive chairman, he was warned that the Mexican authorities had unearthed evidence of money laundering that "may imply criminal responsibility of HSBC".

The Senate report makes no allegation of wrongdoing by Lord Green.

The minister is set to play a key role in the drive to use the Olympics to seal lucrative trade contracts for Britain.

Profile: The banker who balances God and Mammon

Lord Green is not your everyday banker. He couldn't be further from the profession's image of immoral, bonus-fuelled money-grubbers.

Unfailingly courteous, cerebral and deeply religious, the tall and bone-thin peer sometimes seemed like one of the better sorts of civil servant when he was running the world's local bank. Which is what he was for a number of years (at the Ministry of Overseas Development) having first spent a year working in a hostel for alcoholics where he met his wife, Joy. From there, he joined McKinsey, the management consultancy, where he spent five years and earned a passport into the fast track of finance. He joined HSBC in 1982 and was on the board within 16 years with responsibility for investment banking. He became chief executive in 2003, and, three years later, executive chairman.

Yet the contradictions presented by his faith – he is an ordained minister – and his career never left him.

He found the time to pen two books – Serving God, Serving Mammon, reconciling his career with this faith, and Good Value: Choosing a Better Life in Business. Perhaps some of his colleagues should have read them, then the bank's issues may not have arisen.


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Former HSBC Boss Turned UK Minister Says Won't Resign

A former chairman of HSBC Holdings PLC (HBC) Tuesday expressed regret over alleged money-laundering at the bank during his time in charge, but said he won't resign from his current role as a U.K. government minister.

Lord Green of Hurstpierpoint tells Sky News' City Editor Mark Kleinman he had "acted appropriately" and had "no case to answer" after a U.S. Senate committee found that HSBC had performed inadequate checks between 2006 and 2009, which allowed drug cartels and terrorist organizations to allegedly launder money through HSBC's U.S. bank.

Lord Green was chief executive of HSBC from 2003-2006 and then chairman until 2010. He took up the role of trade minister in the coalition government at the beginning of last year.

"As and when issues were drawn to our attention, as we were seeking to grapple with the issues, we took action," he said. "I think we must acknowledge there were some failures of implementation. HSBC has expressed its regret for that. I share that regret."

In a separate development, he also expressed regret over the HSBC scandal in a letter to Labour treasury spokesman Chris Leslie. But Mr. Leslie said Lord Green hadn't addressed the concerns he had raised and that the peer should address parliament over the allegations.

"The House of Lords remains in session. He must now come to Parliament and explain what he knew, when he knew it and what action he took," Mr. Leslie said.

Lord Green also quashed speculation he was in the running as a possible successor to Mervyn King as governor of the Bank of England, saying he had "no interest in any other public service jobs."


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