HSBC apologizes over money laundering scandal | News | DW | 17.07.2012
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HSBC apologizes over money laundering scandal

HSBC has apologized after revelations that lax money laundering rules allowed drug cartels access to the US financial system. The scandal has already prompted the resignation of one top HSBC executive.

HSBC Bank USA (HBUS) President Irene Dorner expressed regret on Tuesday for the bank's failure to apply anti-money-laundering rules, a day after the release of a damning report into its operations.

"We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public," Dorner told a hearing of the Senate Permanent Subcommittee on Investigations.

Among a number of revelations, the panel's report indicated that lax rules at HSBC had allowed the bank to serve Mexican drug cartels as a conduit for money laundering.

Dorner was among a number of top US treasury officials and HSBC executives who testified at the hearing. Shortly before reading his own testimony, the bank's head of group compliance, David Bagley, resigned from his post.

"I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance. I have agreed to work with the bank's senior management towards an orderly transition," he said.

Bagley, who has served in the position since 2002, went on to join Dorner in apologizing for significant failures at the bank.

"Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators," he said.

'Shocking' practices

The 330-page report was released on Monday following a year long inquiry into the bank's practices. It found that HSBC had allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the United States without adequate controls.

Senator Carl Levin, who chaired the hearing, said the revelations were a product of HSBC's "history of weak anti-money-laundering controls."

"It's pretty shocking stuff," he added.

Levin pointed in particular to the report's claim that drug traffickers had used HSBC in Mexico to transfer huge sums of money to the United States.

"The concern was that drug traffickers unable to deposit large amounts of cash in US banks due to [anti-money-laundering controls], were transporting US dollars to Mexico, arranging for bulk deposits there, and then using Mexican financial institutions to insert the cash back into the US financial system," the report said.

Moreover, the report accused HSBC and its US affiliate of concealing references to Iran in transactions in order to avoid US sanctions. It alleged that 25,000 transactions were processed over a six year period, amounting to more than $16 billion (13 billion euros).

It also said HBUS had "provided US dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing."

ccp/slk (AFP, AP, Reuters)