HSBC’s head of group compliance, David Bagley, announced his resignation before a US Congressional committee as the bank’s executives apologised for its failure to prevent subsidiaries from moving the proceeds of drug trafficking and terrorist financing in Mexico and elsewhere.
“Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators,” Bagley said.
According to a report produced by the Senate permanent subcommittee on investigations, HSBC failed to adequately respond to warnings that its compliance system may have inadvertently allowed drug proceeds from Mexico to be laundered through the bank and allowed terrorist financiers in the Middle East to obtain US dollars.
Senate investigators found that HSBC supplied US$1bn in cash to a Saudi Arabian bank with suspected links to terrorism, including the al-Qaeda organisation, despite internal concerns and the issue of a directive ordering that affiliates sever all ties to the Middle Eastern lender. The investigators allege that HSBC’s US arm later resumed ties with the bank.
HSBC executives who testified before the committee included Paul Thurston, who was HSBC’s Mexico chief executive officer (CEO) in 2007 when law-enforcement concerns about drug cartel laundering became known to the bank. Thurston, who has since moved to HSBC’s Hong Kong operations, admitted that suspicious accounts had been uncovered and some of what he found “took my breath away”.
He said that some problems arose because HSBC Mexico was a fast-growing unit that handled its anti-money laundering screening (AML) at each of its 1,300 branches. He had attempted to centralise AML operations but the bank had struggled to respond to suspicious transaction alerts, which at certain times had numbered as many as 1,000 a week.
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