HSBC

HSBC Money Laundering Scandal: U.S. Financial System Vulnerabilities (2012)

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• published: 28 Jul 2015
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After graduating from Stetson, Everett Stern took a position as an AML compliance officer for HSBC in their New Castle, Delaware office in October 2010, where he monitored the bank's Middle Eastern transactions. After coming across many suspicious transactions tied to terrorist groups in the Middle East such as Hamas and Hezbollah, he repeatedly alerted his supervisors, who ignored his warnings.[4] Specifically, he uncovered a multinational money-laundering network that generated millions for Hezbollah through the Lebanese brothers Ali, Husayn, and Kassim Tajideen through their Gambia-based company, Tajco Ltd.[5] After several such episodes, Stern made contact with the FBI and CIA, which began to investigate HSBC. He left work at HSBC in November 2011.[1] By the summer of 2012, the inquiry had broadened to the bank’s money laundering operations in the Middle East, Mexico, Iran, Sudan, and North Korea.[6] A July 2012 congressional report found that from 2001 through 2010, HSBC had “exposed the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering controls.”[7] In December 2012, HSBC came to a settlement with U.S. authorities which required it to pay a record $1.92 billion fine, as well as improve its anti-money laundering controls, in exchange for a deferment of criminal prosecution for five years. https://en.wikipedia.org/wiki/Everett_Stern Money laundering has been an issue in Argentina, India, the United Kingdom, the United States and Switzerland. Following search warrants and raids beginning in January 2013, in mid-March 2013 Argentina's main taxing authority accused HSBC of using fake receipts and dummy accounts to facilitate money laundering and tax evasion.[105][106][107] On 19 July 2012, India investigated alleged violation of safety compliance, in which Indian employees were believed to be involved.[108] On 9 November 2012, Indian activist and politician Arvind Kejriwal said he had details of 700 Indian bank accounts hiding black money with a total value of ₹60 billion (US$940 million) with HSBC in Geneva.[109] In June 2013, a media outlet in India did an undercover expose where HSBC officers were caught on camera agreeing to launder "black money." HSBC placed these employees on leave pending their own internal investigation.[110] In early February 2013, appearing before UK's Parliamentary Banking Standards Commission, CEO Stuart Gulliver acknowledged that the structure of the bank had been "not fit for purpose." He also stated, "Matters that should have been shared and escalated were not shared and escalated."[111] HSBC has also been accused of laundering money for terrorist groups.[111][112] In both 2003 and 2010, U.S. regulators ordered HSBC to strengthen its anti-money laundering practices.[113] In October 2010, the United States OCC issued a Cease and Desist Order requiring HSBC to strengthen multiple aspects of its Anti-Money Laundering (AML) program. The identified problems included a once massive backlog of over 17,000 alerts identifying suspicious activity, failure to file timely suspicious activity reports with U.S. law enforcement, failure to conduct any due diligence to assess risks to HSBC affiliates before opening correspondent accounts for them, a three-year failure by HBUS from mid-2006 to mid-2009 to conduct any AML of $15 billion in bulk cash transactions from those same HSBC affiliates, failure to monitor $60 trillion in annual wire transfers by customers in countries rated lower risk by HBUS, and inadequate and unqualified AML staffing, resources, and leadership. It was noted that HSBC fully cooperated with the Senate investigation.[114] In November 2012 it was reported that HSBC had set up offshore accounts in Jersey for suspected drug-dealers and other criminals, and that HM Revenue and Customs had launched an investigation following a whistleblower leaking details of £700 million allegedly held in HSBC accounts in the Crown dependency .[115] In December 2012, Assistant U.S. Attorney General Lanny Breuer suggested that the U.S. government might resist criminal prosecution of HSBC which could lead to the loss of the bank's U.S. charter. He stated, "Our goal here is not to bring HSBC down, it's not to cause a systemic effect on the economy, it's not for people to lose thousands of jobs." https://en.wikipedia.org/wiki/HSBC