Saturday 21 April 2018

'Bank handled drug-cartel money'

Peter Flanagan

Peter Flanagan

HSBC is the world's second-biggest bank and has been one of the few major finance houses to have avoided significant scandals in recent years. That changed, however, with yesterday's US Senate report.

The damning report from the Senate Permanent Subcommittee on Investigations said the bank routinely acted as a financier to clients, routing funds from the world's most dangerous regions, including Mexico, Iran and Syria.

During a hearing on the Senate report, David Bagley, a top compliance executive at HSBC, said he would step down.

The resignation was part of HSBC's effort to apologise and show that it has cleaned up its act, even as the bank faces fresh questions about whether it has really fixed major flaws in catching and stopping money laundering.

The Senate report detailed how between 2007 and 2008, HSBC's Mexican operations moved $7bn (€5.7bn) into the bank's US operations.

Both Mexican and US authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds, the report said.

From 2000 to 2009, HSBC gave its lowest risk rating to Mexico "despite overwhelming information indicating that Mexico was a high-risk jurisdiction for drug trafficking and money laundering", senate investigators wrote.


HSBC's Mexican clients included "casas de cambio", or currency-exchange firms, that were identified in US Treasury Department warnings as hubs for laundering drug money.

The lender ignored links to terrorist financing among its customer banks, including Riyadh, Saudi Arabia-based Al Rajhi Bank, which had ties to terror groups through its owners, the report stated.

Internal documents show HSBC decided to cut ties with the bank before reversing itself under pressure from Al Rajhi, which received shipments of $1bn (€814m) in cash from HSBC's US operation from 2006 to 2010, according to the report.

HSBC's US unit "offers a gateway for terrorists to gain access to US dollars and the US financial system", the report said.

"HSBC has a legal obligation to take reasonable steps to ensure it is not dealing with banks that may have links to or facilitate terrorist financing."

Yesterday the bank said it had dealt head-on with allegations of pervasive money-laundering, saying it had overhauled how it polices transactions.

The bank is still facing a Justice Department investigation and could face fines of hundred sof millions of dollars.

Irish Independent

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