HSBC: a "pervasively polluted" culture
". . . exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML [anti money laundering] system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”
- Servicing High Risk Affiliates. HSBC’s U.S. bank, HBUS, offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges, high risk clients like casas de cambio, high risk products like U.S. dollar accounts in the Cayman Islands, a secrecy jurisdiction, and weak AML controls. The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.
- Circumventing OFAC Safeguards. Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes. In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactions’ links to Iran.
- Disregarding Terrorist Financing Links. HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.
- Clearing Suspicious Bulk Travelers Checks. In less than four years, HSBC cleared $290 million in obviously suspicious U.S. travelers cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business.
- Offering Bearer Share Accounts. HSBC offered more than 2,000 accounts to bearer share corporations, despite the high risk of money laundering and illicit conduct that results since their ownership can be readily transferred without a trail.
“HSBC’s compliance culture has been pervasively polluted for a long time. Its recent change in leadership says it’s committed to cleaning house. That commitment is welcome surely, but it will take more than words for the bank to change course. Just as certain is the need for tough regulation by the OCC.”The Thatcher revolution of the 1980s led the world into the brave new era of corporate deregulation. With the state "off their backs" British businesses could thrive and the glory days of pre-Keynesianism would be revived. Thirty years on a different picture emerges. Former stars like BP have wrecked their reputations through corner cutting on environmental protection. Others like Debenhams and the Rover Group had their guts extracted by asset strippers. But the worst impact of deregulation can be seen in the City of London which stands exposed as almost irredeemably corrupt.
And the man in charge of HSBC amidst all this? A Church of England Vicar.