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HSBC in money-laundering probe

By David McMillin · Bankrate.com
Wednesday, July 18, 2012
Posted: 6 am ET

Another member of the banking industry has landed in the hot seat on Capitol Hill.

This week, HSBC has come under fire with accusations for the bank's failure to comply with anti-money-laundering regulation. According to a 330-page report from the U.S. Senate Permanent Subcommittee on Investigations, it appears as though that failure led to convenient financing for Mexican drug cartels, sanctioned Iranian clients and banks in Saudi Arabia and Bangladesh known for links to terrorist operations.

A release from the office of Sen. Carl Levin (D-Mich.) documents some of the illegal activity and highlights a bank that appears to have repeatedly looked the other way when dealing with money that should have raised red flags. Here are two big examples.

  • Between 2007 and 2008, HSBC's Mexican affiliate transported around $7 billion into its U.S. banking unit, despite warnings that such a massive sum likely meant ties to drug operations.
  • The bank allowed nearly 25,000 transactions linked to clients in Iran make their way through U.S. accounts. The transactions involved more than $19 billion.

In a statement on the bank's website, HSBC confirms the accusations do indeed have some merit. "We will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect." The chief compliance officer at HSBC has already stepped down from his position, too.

There is no word on any official fine or consequences from the U.S. government, but no one expects lawmakers to just let off this kind of alleged activity with a slap on the wrist. Money laundering poses a serious threat to the integrity of the U.S. banking system and the safety of the country, allowing criminals to wire the necessary money they need to fund their operations.

While it looks like one of the country's biggest banks failed to meet compliance guidelines, the subcommittee will also need to look into another important question: How did regulators fail to spot this activity?

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4 Comments
Grow Your Business Club
September 03, 2012 at 7:00 pm

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Anti Money Laundering
August 01, 2012 at 5:26 am

HSBC bank is accused of not complying with anti money laundering regulations.this mistake has impacted on the reputation of the bank a lot.we trust on the bank but they brake our trust for ever...there should be strict rule for the AML.

Ray
July 18, 2012 at 11:09 am

How did regulators fail to spot the Madoff ponzy scheme? Amazing, isn't it!