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Senate Throws The Book At HSBC Accusing It Of Massive "Money
by Cobra478 on Mon Jul 16, 2012 3:51 pm
Senate Throws The Book At HSBC Accusing It Of Massive "Money Laundering, Drug Trafficking And Terrorist Financing"
Just because there is already an overflow of confidence in the financial system, here comes the Senate's Permanent Subcommittee On Investigations with a 340 page report detailing how HSBC "exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls." Of course, since HSBC is one of the world's largest banks, what it did was not in any way unique, and it is quite fair to say that every other bank has the same loose anti-money "laundering" provisions. What HSBC was likely most at fault for was not providing sufficient hush money to the appropriate powers in the highest US legislative administration. But at least tomorrow we will have yet another dog and pony show, accusing that HSBC did what the NAR does every single day. Because let's not forget that the National Association of Realtors is exempt for anti-money laundering provision checks: after all how else will US real estate remain at its current elevated levels if not for drug, blood, and fraud money from abroad various Russian, Chinese, and petrodollar kingpins? But one can't possibly pursue the real truth if it just may impair the fair value of that backbone of honest, hard-working US society: still massively overpriced housing in a world in which those who need mortgages will never get them.
From the WSJ:
The findings will be aired Tuesday when senior HSBC officials are scheduled to testify before a Senate subcommittee looking into the matter. In a nearly 400-page report, the subcommittee detailed a regulatory culture at the bank where some officials allegedly engaged in risky behavior in pursuit of profits.
The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.
The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.
The Mexico operation, Senate investigators allege in the report, should have been the global bank's most worrisome because it continued doing business with money-changing businesses known as "casas de cambio." These businesses were cited by U.S. authorities to be fronts for drug-cartel money laundering, and HSBC conducted business with them years after other big banks cut them off.
HSBC Mexico's top anti-money laundering official, as he prepared to leave the bank, told an official from HSBC's London compliance office in 2008 that he believed there was "a culture [of] pursuing profits and targets at all costs" and that it "was only a matter of time before the bank faced criminal sanctions," Senate investigators found.
And from the Senate:
Global banking giant HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls, a Senate Permanent Subcommittee on Investigations probe has found.
“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,” said Sen. Carl Levin, D-Mich., subcommittee Chairman. “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”
The Subcommittee conducted a year-long investigation into HSBC and has detailed its findings in a 330-page report to be released at the hearing Tuesday, along with more than 100 documents, including bank records and internal emails. The hearing, which begins at 9:30 a.m., will include testimony from HSBC officials and federal regulators.
The Subcommittee investigation focused on HSBC’s key U.S. affiliate, HSBC Bank USA, N.A., known as HBUS, which functions as the U.S. nexus for HSBC’s worldwide network. HSBC has 7,200 offices in more than 80 countries and 2011 profits of $22 billion; HBUS has 470 branches across the United States with 4 million customers. HBUS provides accounts to 1,200 other banks including more than 80 HSBC affiliates. Called correspondent banking, HBUS provides these banks with U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions. Correspondent banking can become a major conduit for illicit money flows unless U.S. laws to prevent money laundering are followed.
In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe AML deficiencies, including a failure 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 AML due diligence before opening accounts for HSBC affiliates. Subcommittee investigators found that the OCC had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence of AML problems.
The Subcommittee investigation focused on five areas of abuse:
--Servicing High Risk Affiliates. HSBC’s U.S. bank, HBUS, offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges, high risk clients like casas de cambio, high risk products like U.S. dollar accounts in the Cayman Islands, a secrecy jurisdiction, and weak AML controls. The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.
--Circumventing OFAC Safeguards. Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes. In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactions’ links to Iran.
--Disregarding Terrorist Financing Links. HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.
--Clearing Suspicious Bulk Travelers Checks. In less than four years, HSBC cleared $290 million in obviously suspicious U.S. travelers cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business.
--Offering Bearer Share Accounts. HSBC offered more than 2,000 accounts to bearer share corporations, despite the high risk of money laundering and illicit conduct that results since their ownership can be readily transferred without a trail.
The report recommends a number of changes at HSBC’s U.S. bank, including higher scrutiny of HSBC affiliates for money-laundering risk, closing accounts of banks linked to terror financing, and steps to ensure the bank does not process transactions with prohibited entities such as terrorists, drug lords, and rogue regimes. It also recommends overhauling the AML controls on travelers cheques and eliminating bearer share accounts.
More: http://www.zerohedge.com/news/senate-th ... rorist-fin
Just because there is already an overflow of confidence in the financial system, here comes the Senate's Permanent Subcommittee On Investigations with a 340 page report detailing how HSBC "exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls." Of course, since HSBC is one of the world's largest banks, what it did was not in any way unique, and it is quite fair to say that every other bank has the same loose anti-money "laundering" provisions. What HSBC was likely most at fault for was not providing sufficient hush money to the appropriate powers in the highest US legislative administration. But at least tomorrow we will have yet another dog and pony show, accusing that HSBC did what the NAR does every single day. Because let's not forget that the National Association of Realtors is exempt for anti-money laundering provision checks: after all how else will US real estate remain at its current elevated levels if not for drug, blood, and fraud money from abroad various Russian, Chinese, and petrodollar kingpins? But one can't possibly pursue the real truth if it just may impair the fair value of that backbone of honest, hard-working US society: still massively overpriced housing in a world in which those who need mortgages will never get them.
From the WSJ:
The findings will be aired Tuesday when senior HSBC officials are scheduled to testify before a Senate subcommittee looking into the matter. In a nearly 400-page report, the subcommittee detailed a regulatory culture at the bank where some officials allegedly engaged in risky behavior in pursuit of profits.
The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.
The report said that HSBC did little to clean up operations that should have raised concerns, including its Mexico bank. That bank had a branch in the Cayman Islands with no offices or staff but held 50,000 client accounts and $2.1 billion in 2008, the report said.
The Mexico operation, Senate investigators allege in the report, should have been the global bank's most worrisome because it continued doing business with money-changing businesses known as "casas de cambio." These businesses were cited by U.S. authorities to be fronts for drug-cartel money laundering, and HSBC conducted business with them years after other big banks cut them off.
HSBC Mexico's top anti-money laundering official, as he prepared to leave the bank, told an official from HSBC's London compliance office in 2008 that he believed there was "a culture [of] pursuing profits and targets at all costs" and that it "was only a matter of time before the bank faced criminal sanctions," Senate investigators found.
And from the Senate:
Global banking giant HSBC and its U.S. affiliate exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls, a Senate Permanent Subcommittee on Investigations probe has found.
“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,” said Sen. Carl Levin, D-Mich., subcommittee Chairman. “HSBC used its U.S. bank as a gateway into the U.S. financial system for some HSBC affiliates around the world to provide U.S. dollar services to clients while playing fast and loose with U.S. banking rules. Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions. The bank’s federal bank regulator, the OCC, tolerated HSBC’s weak AML system for years. If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”
The Subcommittee conducted a year-long investigation into HSBC and has detailed its findings in a 330-page report to be released at the hearing Tuesday, along with more than 100 documents, including bank records and internal emails. The hearing, which begins at 9:30 a.m., will include testimony from HSBC officials and federal regulators.
The Subcommittee investigation focused on HSBC’s key U.S. affiliate, HSBC Bank USA, N.A., known as HBUS, which functions as the U.S. nexus for HSBC’s worldwide network. HSBC has 7,200 offices in more than 80 countries and 2011 profits of $22 billion; HBUS has 470 branches across the United States with 4 million customers. HBUS provides accounts to 1,200 other banks including more than 80 HSBC affiliates. Called correspondent banking, HBUS provides these banks with U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions. Correspondent banking can become a major conduit for illicit money flows unless U.S. laws to prevent money laundering are followed.
In 2010, HSBC was cited by its federal regulator, the Office of the Comptroller of the Currency (OCC), for multiple severe AML deficiencies, including a failure 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 AML due diligence before opening accounts for HSBC affiliates. Subcommittee investigators found that the OCC had failed to take a single enforcement action against the bank, formal or informal, over the previous six years, despite ample evidence of AML problems.
The Subcommittee investigation focused on five areas of abuse:
--Servicing High Risk Affiliates. HSBC’s U.S. bank, HBUS, offered correspondent banking services to HSBC Bank Mexico, and treated it as a low risk client, despite its location in a country facing money laundering and drug trafficking challenges, high risk clients like casas de cambio, high risk products like U.S. dollar accounts in the Cayman Islands, a secrecy jurisdiction, and weak AML controls. The Mexican affiliate transported $7 billion in physical U.S. dollars to HBUS from 2007 to 2008, outstripping other Mexican banks, even one twice its size, raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States.
--Circumventing OFAC Safeguards. Foreign HSBC banks actively circumvented U.S. safeguards at HUBS designed to block transactions involving terrorists, drug lords, and rogue regimes. In one case examined by the Subcommittee, two HSBC affiliates sent nearly 25,000 transactions involving $19.4 billion through their HBUS accounts over seven years without disclosing the transactions’ links to Iran.
--Disregarding Terrorist Financing Links. HBUS provided U.S. dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing.
--Clearing Suspicious Bulk Travelers Checks. In less than four years, HSBC cleared $290 million in obviously suspicious U.S. travelers cheques for a Japanese bank, benefiting Russians who claimed to be in the used car business.
--Offering Bearer Share Accounts. HSBC offered more than 2,000 accounts to bearer share corporations, despite the high risk of money laundering and illicit conduct that results since their ownership can be readily transferred without a trail.
The report recommends a number of changes at HSBC’s U.S. bank, including higher scrutiny of HSBC affiliates for money-laundering risk, closing accounts of banks linked to terror financing, and steps to ensure the bank does not process transactions with prohibited entities such as terrorists, drug lords, and rogue regimes. It also recommends overhauling the AML controls on travelers cheques and eliminating bearer share accounts.
More: http://www.zerohedge.com/news/senate-th ... rorist-fin
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