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June 16, 2013, 12:49:45 AM |
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HSBC actively circumvented rules designed to “block transactions involving terrorists, drug lords, and rogue regimes.”
In one case, “two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS [HSBC’s U.S. affiliate] accounts over seven years without disclosing the transactions’ links to Iran.”
HSBC provided U.S. dollar financing and services to banks in Saudi Arabia and Bangladesh that were tied to terrorist organizations, while also clearing $290 million in “obviously suspicious travelers cheques” that benefitted Russians “who claimed to be in the used car business.”
The investigation showed how the bank’s regulator, the Office of the Comptroller of the Currency (OCC) failed to take a single enforcement action against HSBC despite numerous violations by the international bank.
Among them, failing to monitor $60 trillion in wire transfer and account activity, a backlog of 17,000 unreviewed account alerts regarding potentially suspicious activity, and a failure to conduct anti-money laundering due diligence before opening accounts for HSBC affiliates.
What did the us do:
State and federal authorities decided against indicting HSBC in a money-laundering case over concerns that criminal charges could jeopardize one of the world’s largest banks and ultimately destabilize the global financial system.
Instead, HSBC agreed to a record $1.92 billion settlement with authorities (a fraction of the profit they made laundering these funds). The HSBC deal included a deferred prosecution agreement which is a notch below a criminal indictment and requires the bank to forfeit more than $1.2 billion and pay about $700 million in fines.
US authorities sent a very clear signal that criminal prosecution for such actions are remote for big banks.
As part of the deal HSBC must also strengthen its internal controls and stay out of trouble for the next five years.
(didn't they already try that!!)
The HSBC case is part of a sweeping investigation into the movement of tainted money through the American financial system. In 2010, Lanny A. Breuer, the head of the Justice Department’s criminal division, created a money-laundering task force that has collected more than $2 billion in fines from banks which has ensnared six foreign banks in recent years, including
Credit Suisse and
Barclays.
In June,
ING Bank
reached a $619 million settlement to resolve claims that it had transferred billions of dollars in the United States for countries like Cuba and Iran that are under United States sanctions.
Federal and state authorities also won a $327 million settlement from
Standard Chartered
, a British bank. The bank, which in September agreed to a larger settlement with New York’s top banking regulator, admitted processing thousands of transactions for Iranian and Sudanese clients through its American subsidiaries.
For example, an HSBC executive at one point argued that the bank should continue working with the Saudi Al Rajhi bank, which has supported Al Qaeda, according to the Congressional report.
Despite repeated urgings from federal officials to strengthen protections in its vast Mexican business, HSBC instead viewed the country from 2000 to 2009 as low-risk for money laundering, the Senate report found. Even after HSBC’s Mexican operation transferred more than $7 billion to the United States — a volume that law enforcement officials said had to be “illegal drug proceeds” — lax controls remained.
The Congressional hearings exposed weaknesses at the Office of the Comptroller of the Currency, the national bank regulator.
In 2010, the regulator found that HSBC had severe deficiencies in its anti-money laundering controls, including $60 trillion in transactions and 17,000 accounts flagged as potentially suspicious, activities that were not reviewed. Despite the findings, the regulator did not fine the bank.
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