Wednesday, July 18, 2012

HSBC involved in “drug money laundering”

The US Senate has released a report which alleges that HSBC Holdings plc (ADR) (NYSE:HBC) alloweddrug money from Mexico to pass through it. The bank has also processed some suspicious transactions from Cayman Islands, Iran, Saudi Arabia and Syria. The report also claims that US regulators, particularly the Office of the Controller of the Currency (OCC), have shown negligence in overseeing HSBC, despite multiple warnings.

The report comes at a time when the British banking sector is already under the scrutiny of dozens of regulators from around the world. The investigations into HSBC were carried out by Senate Permanent Subcommittee on Investigations.

A separate independent investigation by Reuters had earlier revealed that the bank ‘persistently’ failed to implement its own anti-money laundering compliance. Senator Carl Levin, the chairman of the committee has blamed the “polluted” culture of the bank that allowed such things to happen. "The culture at HSBC was pervasively polluted for a long time," he said.

The committee also found that OCC allowed the problems to “fester” for several years until it discovered that two other US government’s agencies were also investigating into the money laundering scandal.

A Senate hearing will be conducted on Tuesday in which the bank’s executives will testify. Thomas Curry, the current controller at OCC will also testify at the hearing. The report is a result of a yearlong investigation that included a review of about 1.4 million documents and dozens of interviews of the bank’s employees and US regulators.

This however, did not come as a surprise to the bank. Its CEO Stuart Gulliver has said, "It is right that we will be held accountable and that we take responsibility for fixing what went wrong ….. As well as answering the subcommittee's questions, we will explain the significant changes we have already made to strengthen our compliance and risk management infrastructure and culture,"

In another statement, HSBC has said, “"We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong,"

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