A US Senate probe has disclosed how lax controls at Europe’s largest bank left it vulnerable to being used to launder dirty money from around the world.
The report into HSBC, released ahead of a Senate hearing on Tuesday, says huge sums of Mexican drug money almost certainly passed through the bank.
Suspicious funds from Syria, the Cayman Islands, Iran and Saudi Arabia also passed through the British bank.
HSBC said it expected to be held accountable for what went wrong.
The report into HSBC was issued by the Senate Permanent Subcommittee on Investigations, a Congressional watchdog that looks at financial improprieties.
It also concluded that the US bank regulator, the Office of the Comptroller of the Currency, failed to properly monitor HSBC.
THE REPORT INCLUDES that HSBC moved huge sum from Mexico into the U.S. between 2007 and 2008;
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Head of compliance at British banking giant HSBC resigned in front of a US Senate subcommittee today after it emerged the bank had exposed the US to billions of dollars worth of money laundering, drug trafficking, and terrorist financing.
David Bagley, who has been HSBC head of group compliance since 2002, stepped down before the Homeland Security and Governmental Affairs subcommittee after its findings were published.
Mr Bagley, who had a 20 year career with the bank and is based in London, said: ‘Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators.’
Powerhouse: HSBC headquarters in the City of London. The bank has been accused of laundering money for the Mexican mobEarlier in the hearing, subcommittee chairman Senator Carl Levin said HSBC’s compliance culture had been ‘pervasively polluted for a long time’.
The revelations are another blow to the reputation of the banking industry following the current scandal over the manipulation of the Libor inter-bank lending rate.
An explosive report claims a ‘pervasively polluted’ culture atHSBC led it to act as financier to clients seeking to route shadowy funds from the world’s most dangerous and secretive corners, including Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria.
The Senate probe detailed how sweeping the problems have been, both at the bank and at the Office of the Comptroller of the Currency, a top U.S. bank regulator which the report said failed to properly monitor HSBC.
‘The culture at HSBC was pervasively polluted for a long time,’ said Senator Carl Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, a Congressional watchdog panel.
The report comes at a troubling time for a banking industry reeling from a multi-country probe into the manipulation of global benchmark rates.
Last month, rival British bank Barclays Plc agreed to pay a $453 million fine to settle a U.S.- British probe into the rigging of the benchmark interest rate known as the London interbank offered rate, or Libor.
The Senate probe provides a rare look at how HSBC responded when confronted with numerous cases of suspect money flows.
Vicious: Mexican gangsters are paraded in a police photo. The country is one of the most crime-ridden places in the world as rival cartels compete to control the lucrative drugs trade
An HSBC facility in New Castle, Delaware. Executives insist that after years of run-ins with U.S. authorities over alleged anti-money laundering lapses, they have cleared up their actThe report caps a year-long inquiry that included a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators. It will be the focus of a hearing on Tuesday at which HSBC and OCC officials are scheduled to testify. The bank and the regulator are expected to face tough questions at the hearing about how the abuses were allowed to continue, even after the OCC took regulatory action against HSBC in 2010. An investigation found persistent lapses in the bank’s anti-money laundering compliance since 2010.In an emailed statement, HSBC said the Senate report had provided ‘important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system’.The bank said it is spending more money on compliance and has become more coordinated in policing high-risk transactions.
Several HSBC executives are expected to testify, including the bank’s chief legal officer Stuart Levey, who joined in January. He was previously one of the top officials on terrorism and finance at the U.S. Treasury Department.
HSBC plans to ‘acknowledge and apologize’ for failing to spot and deal with money laundering within the bank during a U.S. Senate panel hearing next week, according to an internal memo sent by its chief executive.
‘It is right that we are held accountable and that we take responsibility for fixing what went wrong,’ Chief Executive Officer Stuart Gulliver said in a note sent to staff.
The report also contained strong criticism of the OCC, saying the regulator failed to crack down on the bank despite multiple red flags, allowing money laundering issues ‘to accumulate into a massive problem’.
Probe: Senator Carl Levin referred HSBC to bank regulators in connection with questionable accountingThe U.S. Senate Permanent Subcommittee on Investigations has been investigating HSBC for months as part of an effort by Congress to probe shadowy money flows.
It began in February this year when U.S. senator Carl Levin said he planned to refer HSBC Holdings to its U.S. bank regulator in connection with questionable accounts it provided for senior Angolan officials.
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