HSBC exposed: Drug money banking, terror dealings, money laundering!

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HSBC hid '$16bn,' says a US senate
HSBC concealed more than $US16 billion in sensitive transactions to Iran, a US Senate panel says.
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The HSBC Private Bank in Geneva Source: AFP 

SHAMED HSBC Bank executives have admitted to allowing Iran, terrorists and drug dealers to launder billions of dollars.

With the international banking sector already under fire for manipulating interest rates and reckless trading, HSBC said more should have been done to prevent years of abuse amounting to tens of billions of dollars of illicit transactions.

US politicians grilled HSBC executives and US Treasury officials for failing to guard against money laundering they said benefited Mexican drug lords and terrorist networks, and for their bypassing of sanctions on Iran.

"It's pretty shocking stuff," subcommittee chairman Senator Carl Levin said.

Among the findings was the revelation that HSBC and its US affiliate concealed more than $15.67 billion in sensitive transactions to Iran, violating US transparency rules over a six-year period.

The chief compliance officer of HSBC says he is stepping down from that position after the investigation.

But David Bagley, the head of compliance for London-based HSBC Holdings, told a Senate investigations panel that he will remain at HSBC.

Bagley and other current and former executives of the bank apologised for lapses but said they weren't fully aware of illicit transactions flowing through the bank.

Senators expressed scepticism that they didn't know about problems that persisted for seven years.

"I recognise that there have been some significant areas of failure," David Bagley said at a hearing of the Senate Homeland Security Subcommittee on Investigations.

"HSBC has fallen short of our own expectations and the expectations of our regulators," he said.

While Bagley said the bank has "learned a number of valuable lessons" he acknowledged that this "clearly took far too long to resolve."

In its 330-page report, the Senate found the lender allowed affiliates in countries such as Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the United States without adequate controls.

Bagley has been the head of compliance since 2002, during the period in which the Senate investigation found that HSBC's lack of oversight allowed the bank to be used by drug traffickers and possible financiers of terrorist groups, and for other illicit purposes around the globe.

Bagley said he lacked full authority over the bank's far-flung affiliates, which each had their own compliance officer.

HSBC executives were aware of the "concealed Iranian transactions" - which stripped all identifying Iranian information from documentation - as early as 2001 but allowed thousands of transactions to continue until 2007.

A review of HSBC's use of so-called U-turn transactions, in which funds are sent into and then out of the United States through non-Iranian foreign banks, showed the bank conducted almost $US25,000 transactions with Iran.

"The vast majority of the Iranian transactions, ranging from 75 to 90 per cent over the years, were sent through HBUS and other US dollar accounts without disclosing any connection to Iran," according to the report.

The US prohibits doing business with nations it regards as enemies such as Iran and North Korea, and its Office of Foreign Assets Control (OPAC) imposes tight filters to halt potentially prohibited transactions.

Levin said the bank willfully circumvented the OFAC filters.

The senator said senior HSBC officials in London "knew what was going on, but allowed the deceptive conduct to continue."

Under the slogan The World's Local Bank, the network that began life as the Hong Kong and Shanghai Banking Corporation provides US dollars to HSBC banks in many countries under a procedure known as "correspondent banking."

But its compliance failures clearly spun out of control.

The report said HSBC's Mexican affiliate "transported $7 billion in physical US dollars to HBUS from 2007 to 2008 ... raising red flags that the volume of dollars included proceeds from illegal drug sales in the United States."

And it said HBUS "provided US dollars and banking services to some banks in Saudi Arabia and Bangladesh despite links to terrorist financing."

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