HSBC Cops to Colossal AML Oversight Failure

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While the Libor rate scandal has most of the media attention, alleged violations of AML laws at HSBC are yet another black eye for the financial sector.

Several news sources reported that HSBC failed to prevent billions of transfers to drug cartels and terrorist groups.   A report by the US Senate’s Permanent Subcommittee on Investigations claims that the London based firm failed to review thousands of suspicious transactions and properly vet clients over the past decade.

According to federal law enforcement officials, the transfer of about $7 billion from HSBC’s Mexico unit in cash back to the US could reach that size if it included illegal drug proceeds.   In particular, the Senate report found that HSBC Mexico had many high-profile clients linked to drug trafficking, and that the firm worked extensively with Saudi Arabia ‘s Al Rajhi Bank, some owners of which have been linked to terrorism financing.

So how is this possible given that anti-money laundering laws were beefed up after the asymmetrical terrorist attacks on September 11, 2011?

If proven, HSBC could be found a co-conspirator and accomplice to these criminal activities.    But at very least, from an oversight perspective the failure of accountability here is extreme.

Ironically, prior to the hearing HSCB released a statement that said in part that the bank “takes compliance with the law, wherever it operates, very seriously.”    However, once the hearings were underway HSBC’s head of group compliance, stepped down for failing to guard against the firm and the US financial system against money laundering.

As stunning as the Libor rate scandal is, it is even more mind boggling how does one of the world’s largest banks fail to miss billions cash transactions to drug lords and international terrorists during a ten year span in a Post-911 world.

Anna Timone (195 Posts)


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