According to a shocking report by the US Senate, HSBC acted as a financier to clients seeking a route to make shady drug deals from notorious places rife with drug trafficking like Mexico, Iran, the Cayman Islands, Saudi Arabia and Syria, violating money laundering compliance for many years.
The failings and lax controls inside HSBC included an inability to properly monitor $15 billion in bulk cash transactions between mid-2006 and mid-2009, inadequate staffing and high turnover in the bank’s compliance units, the report said.
The report said between 2007 and 2008, HSBC’s Mexican operations moved $7 billion into the bank’s US operations. HSBC was alerted by US and Mexican authorities about the source of the funds which could possibly be linked to illegal narcotics proceeds.
The Senate probe also examined HSBC’s banking transactions in Saudi Arabia with Al Rajhi Bank, suspected of financing terrorism. Evidence of those links emerged after the September 11, 2001, attacks on the US, citing US government reports, criminal and civil legal proceedings and media reports.
According to the report, in 2005, HSBC told its affiliates to discontinue business with the bank. But HSBC’s affiliates continued to do business with Al Rajhi. But eventually HSBC stopped helping the bank do certain suspicious transactions, to adhere to the regulatory compliance.
However, in 2006, Al Rajhi threatened to cut all ties with HSBC unless it allows bulk-cash transactions. HSBC agreed to continue to provide the bank bulk shipments of US dollars until 2010 when HSBC exited entirely the bulk-cash business.
The Senate probe includes a year-long inquiry with a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators. A hearing is scheduled on Tuesday at which HSBC and Office of the Comptroller of the Currency, a top US bank regulator (OCC) officials will testify.