The U.S. Permanent Senate Subcommittee on Investigations has found that HSBC Holdings PLC allowed drug traffickers, terrorists and rogue states to launder billions of dollars in the U.S. as a result of poor anti-money laundering (“AML“) and counter terrorist financing (“CTF“) controls. The Subcommittee found that HSBCÂ serviced high-risk clients in drug-trafficking countries with weak AML measures; allowed US$19.4 billion in transactions linked to Iran to go through their affiliates over a seven-year period; and provided services to certain banks in Saudi Arabia and Bangladesh despite their ties to terrorist financing.
The Subcommittee investigated HSBC’s AML and CTF practices over a period of twelve months and issued its findings in a 330-page report to the U.S. Senate entitled “U.S. Vulnerabilities to Money Laundering, Drugs and Terrorist Financing: HSBC Case History.”
The Subcommittee focused on HSBC’s U.S. affiliate, HSBC Bank USA, N.A., which functions as the U.S. nexus for HSBC’s worldwide network and is a correspondent bank. In AML, correspondent banks provide affiliated banks with U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions.Â Correspondent banking can be a major conduit for money laundering and terrorist financing.
In 2010, HSBC was the subject of a supervisory letter from the U.S. Office of the Comptroller of the Currency (“OCC”) for several violations of U.S. AML laws, including maintaining an inadequate AML program and was also the subject of a cease and desist order from the OCC requiring it to strengthen multiple aspects of its AML program. At that time, HSBC had a massive backlog of 17,000 alerts identifying suspicious client transactions that were not acted upon.
The Report and testimony are available at this link on the website of Homeland Security & Governmental Affairs.