A Senate report released ahead of the embargo time revealed that HSBC’s lax anti-money laundering policies allowed Mexican drug money, terrorist money, and even suspicious Russian money to enter the U.S. and gain access to U.S. dollar liquidity over the last couple of years.
The report, released late on Monday despite a 10 PM embargo time, was prepared by the Permanent Subcommittee on Investigations, and counted with the support of Senators Carl Levin and Tom Coburn. In a year-long investigation, the Subcommittee found that HSBC violated several rules, exposing the U.S. financial system to “a wide array of money laundering, drug trafficking, and terrorist financing.” According to the report, HSBC’s Mexican affiliate channeled $7 billion into the U.S. between 2007 and 2008 which possibly included “proceeds from illegal drug sales in the United States.” The big British bank's problems have been known for nearly a decade,
They committed to fixing what is wrong, taking the opportunity to learn from previous mistakes. 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 sets up a U.S. bank affiliate as its gateway into the U.S. financial system and lets its global network of affiliates abuse that gateway,” Senator Carl Levin, the Michigan Democrat who heads the subcommittee, told reporters. “The failure of accountability here is dramatic.”
They 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.” Investigation showed how the bank’s regulator, 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.