July 18, 2012
US senate probe has found that Europe's largest bank had lax controls that allowed money laundering for seven years.
HSBC says its executives will apologise for the lapses and promises to fix the problems [Reuters]
Lax controls at Europe's largest bank, HSBC, allowed Mexican drug cartels to launder billions of dollars through its US operations, an investigation by the US senate has found.
HSBC executives brushed off complaints from other bank employees, so that the problems persisted for eight years, the report says.
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 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.
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 organized crime, stopping illicit money flows that support those atrocities is a national security imperative," Levin said 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 ... recognize 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 Comptroller 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 will testify at Tuesday's hearing.
Compliance with anti-money laundering laws "is crucial to our nation's efforts to combat criminal activity and terrorism," Curry said in a statement. He said the agency expects banks to have adequate programs in place to comply with the laws.
The Wall Street Journal reported Monday that HSBC and the justice department have been in settlement talks and an accord could be struck within weeks.
Alisa Finelli, a spokesperson for the justice department, acknowledged that an investigation is under way but declined to comment on possible settlement discussions or a deal.