HSBC grilled in US Senate for lax controls enabling billions of money laundering
The CEO of the U.S. division of the big international bank HSBC is apologizing for lax controls that lawmakers say allowed Mexican drug cartels to launder billions of dollars through the US operation and many other illicit transactions for years.
Irene Dorner, president and CEO of HSBC Bank USA, said in testimony prepared for a hearing by the Senate Permanent Subcommittee on Investigations that we deeply regret and apologize for the lapses by HSBC.
An investigation by the subcommittee found persistent problems at HSBC which executives ignored.
Dorner and other HSBC executives say the bank has made deep changes to its policies and corporate culture to prevent illicit use of the bank. London-based HSBC, which is Europe's largest bank, changed its senior management last year.
These changes will be embedded and sustained going forward, Dorner says.
The panel's chairman, Senator Carl Levin, a Democrat from Michigan, says HSBC's new policies are all good steps. However, Levin said while apologies are welcome, accountability for past conduct is essential. And that is what is missing here.
Senator Levin said HSBC needs to identify which of its affiliates pose a high risk of problems and put them under close monitoring. The bank should consider closing the account of its Mexican affiliate, he said.
HSBC also should close its accounts with banks suspected of providing funding to terrorist groups, Levin said.
The subcommittee's extensive report on HSBC also says US regulators knew the bank had a poor system to detect problems but failed to take action. HSBC executives brushed off complaints from other bank employees, so that the problems persisted for eight years, the report says.
In addition, some HSBC bank affiliates skirted US government bans against financial transactions with Iran and other countries, according to the report. And HSBC US division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaeda and other terrorist groups, the report said.
The US Justice Department said it is conducting a criminal investigation into HSBC operations but declined to confirm that the bank is in settlement talks.
HSBC net income last year was 16.8 billion dollars. It operates in about 80 countries around the world. Its US division is among the top 10 banks operating in the United States. It has assets of roughly 210 billion US in its US operations.
Senator Levin also blasted the federal agency supervising the bank's US operations, the Office of the Comptroller of the Currency. He said the agency tolerated HSBC weak controls against money laundering for years.
Thomas Curry, who heads the Office of the Comptroller of the Currency, also was to testify at the Committee’s hearing.
The Wall Street Journal reported Monday that the HSBC and the Justice Department have been in settlement talks and an accord could be struck within weeks. Justice Department spokeswoman Alisa Finelli acknowledged that an investigation is under way but declined to comment on possible settlement discussions.