Senate tells HSBC: Shape up or get out of the United States

July 18th, 2012

Senator Carl Levin has given an ultimatum to HSBC, after a lax approach to money-laundering for drugs cartels and terrorist groups saw the banking giant fail to review thousands of suspicious transactions or properly to vet clients over the past decade.

Levin, famous for berating Goldman Sachs’ executives over their “shitty deals“, today told the London-headquartered bank: shape up or get out of the US. If HSBC fails to root out the problems, Levin implied the bank will have its US operating licence revoked.

Levin heads up the Senate investigative panel, whose probe uncovered a litany of distinctly unsavoury practices at the “World’s Local Bank”. These included the cleansing of billions of dollars of dirty money for drug cartels, the re-labelling of transactions for “rogue” states like Iran, and the apparent aiding and abetting the 9/11 terrorist group al-Qaeda.

HSBC repeatedly apologised and pledged to clean up its act but, for Levin, this doesn’t wash. Past penalties were too light and the bank didn’t seem to have got the message, he said. He added: “Accountability for past conduct is essential. And that’s what’s been missing here.”

The Financial Times reported that on July 17, 2007, the bank’s head of compliance for Latin American John Root told his counterpart in Mexico, Ramon Garcia Gibson, that his compliance team “needs some cojones”. Unfortunately for the bank, they do not seem to have found any. In an email to Gibson, head of compliance for HSBC’s Mexico unit, Root said:

“I am quite concerned that the [anti-money laundering] committee is not functioning properly. Alarmed, even. I am close to picking up the phone to your CEO.”

As is usual in such circumstances (and the same is true of virtually every other British bank), the profits that can be earned from laundering dirty money seem to have proved so alluring that things like ethics, compliance etc took a back seat .

In the wake of multi-year probes by the US justice department, Treasury department, and the Manhattan district attorney into allegations that it allowed itself to be used as a conduit for illicit billions for money launderers and terrorist financiers, HSBC now faces fines of $1bn or more. The Senate panel spent many years probing HSBC as part of its examination of the US financial system’s vulnerability to the laundering of drugs money proceeds and terrorist financing.

HSBC’s outgoing head of compliance, David Bagley, told lawmakers on Tuesday that he didn’t manage or control the various compliance departments at HSBC banks and affiliates throughout the world. Instead, Bagley said his task was set policy and to escalate issues that were reported to him  — usual bankster buck passing there then?  (I feel justified in using this word using The Economist’s recent cover story).

Bagley told Congress that he would resign from his post and take another position at the bank. Sandy Flockhart, who led HSBC’s Mexican unit from acquisition until 2006, announced last week that he would ‘retire’ from the bank at the end of the month.

It remains to be seen whether Stephen Green, now Baron Green of Hurstpierpoint, who was executive chairman of HSBC at the time the offences occurred, will be forced to step down from his role as minister of trade in the government of David Cameron, or whether he will be defrocked as a priest (Green was ordained as an Anglican priest in 1988).



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