HSBC Accused of Money Laundering Involving Drug Cartels and Al-Qaeda

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HSBC Accused of Money Laundering Involving Drug Cartels and Al-Qaeda


The United States Senate Permanent Subcommittee on Investigation says that HSBC Holdings Plc (HKG:0005) (NYSE:HSBC) (LON:HSBA) failed to stop the money laundering activities of Mexican drug cartels and terrorists in the Middle East.

Based on the 335-page Senate investigation, HSBC Holdings Plc and regulators at the Office of the Comptroller of  Currency (OCC) overlooked suspicious transactions made by entities linked to Mexican drug cartels and terrorist groups over the past decade. One of the transactions cited in the report was an HSBC Mexico  transfer of $7 billion cash to its United States affiliate from 2007 through 2008. Law enforcement officials believe that some of the money included in the $7 billion cash transferred into the country came from illegal drugs.  The report also states that some of HSBC Mexico’s clients are linked with drug trafficking. In addition, the London-based global bank maintains a “huge backlog of account marked for closure due to suspicious activity.” Closures for the said accounts were delayed.

Furthermore, Senate investigators also reported that HSBC regularly transacts with Al Rajhi Bank in Saudi Arabia. Investigators believe that Al Rajhi’s owners, particularly its key founder, are linked to the terrorist group Al Qaeda. Based on the report, HSBC United States provided approximately $1 billion worth of bank notes until 2012.

The Senate Subcommittee on Investigation also found that the OCC failed to do its job and did not take any action against the bank, formal or informal, despite the existence of enough evidence regarding the problem for the past six years.

Stuart Gulliver, Chief Executive Officer of HSBC admitted that the bank failed to carefully review and prevent suspicious transactions. According to Gulliver, “Our anti-money-laundering controls should have been stronger and more effective, and we failed to spot and deal with unacceptable behavior.”

HSBC also acknowledged its failure to meet the standards set by regulators and the expectations of its clients. The bank offered apologies and promised to fix the problems.

In a statement, Michigan Democratic Senator Carl Levin says that it is a big problem for the United States when banks ignore the money laundering law. He also said that it is troubling when regulators do not perform their jobs properly. Senator Levin pointed that HSBC committed similar mistakes in the past, promised to fix the problems but failed. Levin said, “HSBC’s compliance culture has been pervasively polluted for a long time. The recent change in leadership says it’s committed to cleaning house. That commitment is welcome surely, but it will take more than words for the bank to change course.”

HSBC is expected to attend and answer difficult questions from the Senate Subcommittee on Investigation during an inquiry scheduled on Tuesday.  The United States Department of Justice is also conducting its own investigation into the issue.

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