Tuesday, July 17, 2012


HSBC Allowed Drug Money Laundering, Apologizes: Senateeconomictimes.indiatimes.com/news/international-business/hsbc-allowed-drug-money-laundering-apologizes-senate/articleshow/15021701.cms

WASHINGTON: HSBC Holdings Plc put itself at the mercy of the US Senate on Tuesday, acknowledging shortcomings in its anti-money laundering operations and revealing the resignation of a global executive.

David Bagley, a top compliance executive at HSBC since 2002, told a Senate investigative panel that he would step down, after the panel released a scathing report calling out a "pervasively polluted" culture at the bank.

The Senate report, which came after a year-long inquiry, said the bank had routinely acted as a financier to clients routing funds from the world's most dangerous corners, including Mexico, Iran and Syria.

While the big British bank's money-laundering problems have been flagged by regulators for nearly a decade, the report and hearing escalate pressure on the bank, as it awaits a massive fine from the Justice Department for lapses in its safeguards.

It also comes as international banks' reputations have taken a fresh blow due to allegations of a manipulation of a key global benchmark rate.

Senator Carl Levin, who chairs the Senate's Permanent Subcommittee on Investigations, kicked off the hearing on Tuesday with an extensive explanation of how HSBC's lapses have been a threat to financial markets around the world.

A Reuters investigation has found persistent lapses in the bank's anti-money laundering compliance since 2010, despite its assertions that it has cleaned up its act.

"Accountability for past conduct is essential. That's what's been missing here," Levin said, adding that the bank's charter could be at risk if it did not do better.

Not consistent

The hearing started with officials from the US Treasury and Department of Homeland Security, but the fireworks began when HSBC executives came to testify.

Bagley, HSBC's head of group compliance since 2002, told the hearing he had been hamstrung by the bank's structure, and that while changes had been made it was time for him to go.

"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.

The harshest spotlight will be on Stuart Levey, who joined the bank in January as chief legal officer. He had been the Treasury Department's top official on terrorism finance from 2004 to 2011 -- during which time he was involved in cracking down on HSBC for Iran-related transgressions.

In prepared testimony released at the start of the hearing, Levey placed much of the blame on HSBC's rapid expansion, which left in place a decentralized management structure that did not implement consistent standards across the bank and viewed compliance only as an advisory job.

HSBC shares fell 1.9 percent in late London trade. Analysts warned that the bank faced huge financial penalties -- but perhaps worse, found itself in the crosshairs during an election year.


  1. We all know how dirty these guys are. The best thing here is it was reported on. MAIN STREAM MEDIA! I had a friend report it to me with a smile on his face. It is the start of what we have been waiting for. Yippppeeeee!


  2. I agree and MUCH more was being said yesterday on CNBC during Bernake's questioning.!!