Black Dossier: HSBC & Terrorist Finance

It's tough being the world's second largest bank.

HSBC, the London-based British multinational banking and financial services giant operates in 85 countries with 7,200 offices worldwide with assets totaling more than $2.6 trillion (£4.06tn).

They're also caught-up in serial scandals: the Libor interest rate-fixing scam, serious charges of drug money laundering as well as suspicions that bank officers "palled around" with terrorist financiers.

Founded in 1865 when the British Crown seized Hong Kong as a colony in the aftermath of the First Opium War, British merchants (today we'd call them drug lords) needed a bank to handle the brisk trade in the illicit substance and launched the Hongkong and Shanghai Banking Company Limited. Rebranded "HSBC" in 1991, the bank expanded at breakneck speed in the heady days after The Wall fell.

While some might call them a success story, exemplars of financial wizardry in tough economic times, more appropriately perhaps, we might borrow a term from Mafia lore to describe their preeminent position in the capitalist pantheon of corrupt institutions: juiced.

'Sorry, now Go Away'

Today, the "War on Drugs" rivals the "War on Terror" for top spot on the global hypocrisy index.

Moral equivalencies abound. After all, when American secret state agencies manage drug flows or direct terrorist proxies to attack official enemies it's not quite the same as battling terror or crime.

Pounding home that point, a new report by the Senate Permanent Subcommittee on Investigations accused HSBC of exposing "the U.S. financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering (AML) controls."

That 335-page report, "U.S. Vulnerabilities to Money Laundering, Drugs, and Terrorist Financing: HSBC Case History," (large pdf file available here) was issued after a year-long Senate investigation zeroed-in on the bank's U.S. affiliate, HSBC Bank USA, N.A., better known as HBUS.

Drilling down, we learned that amongst the "services" offered by HSBC subsidiaries and correspondent banks were sweet deals with financial entities with terrorist ties; the transportation of billions of dollars in cash by plane and armored car through their London Banknotes division; the clearing of sequentially-numbered travelers checks through dodgy Cayman Islands accounts for Mexican drug lords and Russian mafiosi.

From richly-appointed suites at Canary Wharf, London, the bank's "smartest guys in the room" handed some of the most violent gangsters on earth the financial wherewithal to organize their respective industries: global crime.

A case in point. In 2008 alone the Senate revealed that the bank's Cayman Islands branch handled some 50,000 client accounts (all without benefit of offices or staff on Grand Cayman, mind you), yet still managed to ship some $7 billion (£10.9bn) in cash from Mexico into the U.S. Now that's creative accounting!

Playing fast and loose with U.S. banking rules, Subcommittee Chairman Carl Levin (D-MI) said that by exploiting the bank's "poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions."

Describing a "compliance culture" that was "pervasively polluted for a long time," Levin said it "will take more than words for the bank to change course."

Yet weasel words and butt-covering were all that were proffered to the American people even before Senate hearings began. Bank spokesman Robert Sherman said in an emailed statement that HSBC "will acknowledge that, in the past, we have sometimes failed to meet the standards that regulators and customers expect. We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong."

Right on cue, chief compliance officer David Bagley dramatically fell on his sword during those hearings and resigned on camera. It was quite a performance even by Washington's tawdry standards.

Appearing contrite, Bagley told the panel: "Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators. ... I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance."

While there's no word yet just how big Bagley's golden parachute will be, it's a sure bet he won't spend a day in jail, nor for that matter will Lord Stephen Green, HSBC's former Chairman and Chief Executive Officer.

Between 2003-2010, Green tilled the helm after serial stints directing The Bank of Bermuda Ltd., HSBC Mexico, SA, HSBC Private Banking Holdings (Suisse) SA and HSBC North American Holdings Inc.; units which feature prominently in the scandal. Sensing perhaps that the jig was up, last year he joined David Cameron's Conservative government as Minister of State for Trade and Investment.

Unlike Pappy Bush who claimed to be "out of the loop" during the Iran-Contra guns-for-drugs affair, Green was fully apprised of bank shenanigans and the Senate published emails which prove it.

Cheekily however, while underlings take the fall, Green told The Daily Telegraph, "I do not believe that I have a case to answer other than in the important sense that as chairman and chief executive I was responsible for what the company did. HSBC has expressed regret for the failures. I share that regret."

The Telegraph noted that Green has not considered resigning from Cameron's government, saying he was "very engaged" with his current plum post.

Ironically enough, the current Baron of Hurstpierpoint is an ordained priest in the Church of England and the author of an inspirational tome, Good Value: Reflections on Money, Morality and an Uncertain World. And no, you can't make this stuff up!

The top spot is now occupied by Stuart Gulliver who, quicker than you can say "we're sorry," admonished employees to "do better" and expressed remorse over his firm's "unacceptable behavior." Never mind that before ascending the throne, Gulliver was director of HBUS, HSBC Latin American Holdings Ltd., and HSBC Bank Middle East Ltd., divisions that have raised more than an eyebrow or two amongst Subcommittee investigators.

Topping Bagley's Kabuki-lite performance with her own rendition of clown car camp, Irene Dorner, HBUS's President and CEO told the Senate: "We deeply regret and apologize for the fact that HSBC did not live up to the expectations of our regulators, our customers, our employees, and the general public. HSBC's compliance history, as examined today, is unacceptable. ... We've worked hard to foster a new culture that values and rewards effective compliance, and that starts at the top."

Bathos aside, it was a polite way of saying "let's move on" and get back to the business of lining our pockets; after all, it's what we do best.

'The past is never dead. It's not even past'

Years before hijackers slammed passenger planes into the World Trade Center and the Pentagon killing nearly 3,000 people, secret state agencies began to exploit the fraternal links between Osama bin Laden's Afghan-Arab database of disposable Western intelligence assets, also known as al Qaeda, and prominent financial institutions.

In his 1999 book, Dollars for Terror, journalist Richard Labévière relates how a former CIA analyst explained: "The policy of guiding the evolution of Islam and helping them against our adversaries worked marvelously well in Afghanistan against the Red Army. The same doctrines can still be used to destabilize what remains of Russian power, and especially to counter the Chinese influence in Central Asia."

Was a new Cold War dawning?

No. In fact, it was the same Cold War. Only this time it was tricked-out in seductive finery by denizens of Western think-tanks and on-the-make NGOs. In the age of spin and endless news cycles, they'd hit upon a splendid formula to pour the "old" imperialist wine into new bottles: "humanitarian intervention" and a "responsibility to protect."

It was a brilliant script. In the blink of an eye our media-saavy masters could "enhance democracy" and "reform markets," magically transforming publicly-owned resources into privately-held assets controlled by banks! That terrorist proxies would serve as walk-ons and help drive the final nail into the coffin of national sovereignty wasn't considered proper conversation in polite company.

Labévière wondered whether "the new forms of terrorism actually embody the highest stage of capitalism?" They did, and "the straw men of the bin Laden Organization's subsidiaries [were] very well received by the business lawyers of Wall Street and the Bahamas, by the wealth managers of Geneva, Zurich and Lugano, and in the hushed salons of the City of London."

Not so curiously perhaps, "the privatization of violence and the privatization of the economy has become paradigmatic." In fact, "apart from any religious purpose," Labévière wrote, "the 'Jihad' is gaining ground as a profitable activity. It becomes liable to all the mafioso devolutions, and sinks into pure banditry. In many cases, Islamist ideology is used as a wonder worker to paper over banditry in all its forms."

Bin Laden as a Mafia capo di tutti capi? It certainly was a novel reading of geopolitical machinations!

More to the point, if an "army marches on its stomach," who then are the money men who put food in their bellies and kalashnikovs in their hands?

Bankrolled by Saudi and Gulf banks with a wink, a nod and logistical support from their old friends, the CIA and the Pentagon, today's Green condottieri once again are on the march, wrecking havoc and sowing chaos, with particular attention paid to states targeted as official enemies by the Global Godfather. Just ask the Iraqis, Libyans and Syrians.

While the Senate report may have disclosed that HSBC turned a blind eye to terrorist financing among it correspondent banks, the Riyadh-based Al Rajhi Bank for one, Saudi Arabia's largest privately-held financial institution, such arrangements hardly flourished in a vacuum.

With assets totaling $59 billion (£92.5bn), the Al Rajhi's are amongst the wealthiest families in the Kingdom. Investigators found that after 9/11 "evidence began to emerge that Al Rajhi Bank and some of its owners had links to organizations associated with financing terrorism, including that one of the bank's founders was an early financial benefactor of al Qaeda."

While the Al Rajhi family deny any role in financing terrorism, they have declined "to address specific allegations made in American intelligence and law-enforcement records, citing client confidentiality," The Wall Street Journal reported back in 2007.

Journalist Glenn R. Simpson averred that "a 2003 CIA report claims that a year after Sept. 11, with a spotlight on Islamic charities, Mr. Al Rajhi ordered Al Rajhi Bank's board 'to explore financial instruments that would allow the bank's charitable contributions to avoid official Saudi scrutiny'."

"A few weeks earlier," the Journal disclosed, the Agency said that "Mr. Al Rajhi 'transferred $1.1 billion to offshore accounts--using commodity swaps and two Lebanese banks--citing a concern that U.S. and Saudi authorities might freeze his assets.' The report was titled 'Al Rajhi Bank: Conduit for Extremist Finance'."

Although U.S. law enforcement and secret state agencies "acknowledge it is possible that extremists use the bank's far-flung branches and money-transfer services without bank officials' knowledge," the Journal noted that CIA analysts had concluded that "senior Al Rajhi family members have long supported Islamic extremists and probably know that terrorists use their bank."

It goes without saying that one should always approach CIA reports with a healthy dose of skepticism, especially in light of the Agency's well-documented history of employing cut-outs such as al Qaeda as terrorist cats' paws.

Such reports however, lay a trail of bread crumbs that policy makers can either act upon or more likely, ignore. That senior Bush and Obama administration officials did nothing with this information, never mind the regulatory agencies charged to enforce anti-money laundering laws, is testament to the corrupt, bipartisan nature of American policy as a whole.

It also beggars belief that Lord Green or the bank's compliance officers were unaware of CIA allegations or that Britain's own foreign intelligence arm, MI6, hadn't apprised top officials of the risks involved. In fact, as we'll see below, HSBC's own internal documents prove otherwise.

Osama's 'Golden Chain'

There were certainly plenty of red flags flying which should have alerted bank officials.

In March 2002, al Qaeda's list of financial benefactors surfaced when computers were seized in Sarajevo at the Bosnian headquarters of the Benevolence International Foundation, "a Saudi based nonprofit organization which was also designated a terrorist organization by the Treasury Department."

Osama bin Laden, who held a Bosnian passport issued by the breakaway government fronted by Western "liberal interventionist" darling Alija Izetbegović during NATO's dismemberment of socialist Yugoslavia, was a supporter of the Nazi SS Handschar Division during World War II. Bin Laden referred to this group of financial angels as his "Golden Chain."

Additional evidence also emerged in 2002 during Operation Green Quest, a Treasury Department effort to "disrupt terrorist financing in the United States."

In March of that year, law enforcement officials raided the Herndon, Virginia offices of the SAAR Foundation "an Al Rajhi-related entity." Indeed, the name "SAAR" was an acronym for the organization's founder, Sulaiman Abdul Aziz Al Rajhi, the controlling partner of the Al Rajhi Bank.

Subcommittee investigators commented that "one of the 20 handwritten names in the Golden Chain document identifying al Qaeda's early key financial benefactors is Sulaiman bin Abdul Aziz Al Rajhi, one of Al Rajhi Bank's key founders and most senior officials."

An affidavit supporting the search warrants "detailed numerous connections between the targeted entities and Al Rajhi family members and related ventures. The affidavit stated that over 100 active and defunct nonprofit and business ventures in Virginia were part of what it described as the 'Safa Group,' which the United States had reasonable cause to believe was 'engaged in the money laundering tactic of 'layering' to hide from law enforcement authorities the trail of its support for terrorists."

Green Quest investigators were particularly keen on unraveling links between the SAAR Foundation and the Swiss Al Taqwa Bank, incorporated in the Bahamas in 1988 for "tax purposes."

Founded by Swiss Nazi sympathizer and convert to Islam, Albert Armand (Achmed) Huber, who professed admiration for both Adolph Hitler and Osama bin Laden, the bank was accused by U.S. officials in helping al Qaeda launder funds. Although the Treasury Department froze its assets in 2001, the investigation was shut down by the Bush administration before deeper linkages could be fully uncovered.

In 2011, a lawsuit was filed by insurance giant Lloyd's of London against Saudi Arabia which sought to recover pay outs to victims of the 9/11 attacks. The suit noted "that two individuals who were former executives at Bank al Taqwa, Ibrahim Hassabella and Samir Salah, were also associated with the SAAR Foundation."

At the time, The Independent reported that the legal claim suggested that defendants "'knowingly' provided resources, including funding, to al-Qa'ida in the years before the attack and encouraged anti-Western sentiment which increased support for the terror group."

According to court briefs, "Absent the sponsorship of al-Qa'ida's material sponsors and supporters, including the defendants named therein, al-Qa'ida would not have possessed the capacity to conceive, plan and execute the 11 September attacks. The success of al-Qa'ida's agenda, including the 11 September attacks themselves, has been made possible by the lavish sponsorship al-Qa'ida has received from its material sponsors and supporters over more than a decade leading up to 11 September 2001."

Senate investigators, citing Green Quest and Lloyd's case files, noted that "Mr. Hassabella was a former secretary of al Taqwa Bank and a shareholder of SAAR Foundation Inc. Mr. Saleh was a former director and treasurer of the Bahamas branch of al Taqwa Bank, and president of the Piedmont Trading Corporation which was part of the SAAR network. The U.S. Treasury Department has stated: 'The Al Taqwa group has long acted as financial advisers to al Qaeda, with offices in Switzerland, Liechtenstein, Italy and the Caribbean.' Regarding Akida Bank, the lawsuit complaint alleged that Sulaiman bin Abdul Aziz Al Rajhi was 'on the board of directors of Akida Bank in the Bahamas' and that 'Akida Bank was run by Youssef Nada, a noted terrorist financier'."

The report went on to state that "HSBC was fully aware of the suspicions that Al Rajhi Bank and its owners were associated with terrorist financing, describing many of the alleged links in the Al Rajhi Bank client profile."

As icing on the cake, a 2007 study published by the Congressional Research Service (CRS) also found that "Saudi individuals and other financiers associated with the Golden Chain enabled bin Laden and Al Qaeda to replace lost financial assets and establish a base in Afghanistan following their abrupt departure from Sudan in 1996."

Assets I might add, that were used to bankroll the 9/11 attacks.

'Keen to maintain the relationships'

HSBC's dubious links to the Al Rajhi Bank didn't end with information discovered in the "Golden Chain" files; it fact, they were the tip of the proverbial iceberg.

After 9/11, the FBI reported that three of the hijackers, Hani Hanjour, Nawaf Alhazmi and Abdulaziz Alomari cashed thousands of dollars in travelers checks and received wire transfers from an unnamed individual drawn on accounts at the Al Rajhi Bank.

As researcher Kevin Fenton pointed out in Disconnecting the Dots, links among most of the hijackers were discovered through their banking transactions. "In this context," Fenton wrote, "it is worth noting that Global Objectives, a British banking compliance company, identified fifteen of the nineteen hijackers as high-risk individuals and established database profiles for them before the attacks. ... The list of high-risk people maintained by Global Objectives was available to dozens of banks," a list that presumably also included HSBC.

While there is no evidence that HSBC, or for that matter the Al Rajhi Bank, had prior knowledge of the 2001 atrocity, the gross indifference exhibited by these institutions through their violation of "know your client" (KYC) rules governing financial transactions reveal a callous disdain for elemental norms as they raced to inflate their balance sheets come hell or high water.

Privileged communications amongst senior staff revealed they were well aware of the issues and risks involved, yet did worse than nothing, they lobbied that HSBC continue their arrangements with the Al Rajhi Bank.

Suspicions were such that senior staff "classified Al Rajhi Bank as a 'Special Category of Client' (SCC), its highest risk designation." This was done, Senate investigators noted, because the Kingdom was considered a "high risk country" and due to the fact Al Rajhi's largest shareholder, Sulaiman bin Abdul Aziz Al Rajhi was considered "a Politically Exposed Person (PEP)."

Internal HSBC documents also revealed that in 2002, that is, after the 9/11 provocation, "the International Private Banking Department asked to transfer [several] accounts to HSBC's Institutional Banking Department in Delaware which had superior ability to monitor account activity."

In fact, transferring Al Rajhi accounts to the bank's Delaware division would have just the opposite effect and bank officials knew it.

As journalist Nicholas Shaxson noted in his exposé of offshore banking, Treasure Islands, "Delaware is the biggest state provider of offshore corporate secrecy." Shaxson pointed out that Delaware's Chancery Court has a "'business judgement rule' under which courts should not second-guess corporate managers," thereby "granting corporate bosses extraordinary freedoms from bothersome stockholders, judicial review, and even public opinion."

So much for any alleged "superior ability to monitor account activity"!

HBUS's Joseph Harpster wrote an email, stating: "The most recent concern arose when three wire transfers for small amounts ($50k, $3k and $1.5k) were transferred through the account for names that closely resembled names, not exact matches, of the terrorists involved in the 9/11 World Trade Center attack. ... The profile of the main account reflects a doubling of wire transfer volume since 9/01, a large number of travelers checks but with relatively low value and some check/cash deposits. According to the account officer, traffic increased because they have chosen to send us more business due to their relationship with Saudi British Bank and the added strength of HBC versus Republic. ... Maintaining our business with this name is strongly supported by David Hodghinson of [Saudi British Bank] and Andre Dixon, Deputy Chairman of [HSBC Bank Middle East]. Niall Booker and Alba Khoury [of HBUS] also support."

Aside from adverse publicity, the "low value" of the transactions seemed not to have troubled Harpster or his associates in the least. After all, the total "cost" of murdering 3,000 human beings were certainly small compared to the price of a vacation home in the Hamptons or a new Maserati.

Anxious there might be increased scrutiny from regulators (no worries there!), Harpster's email was forwarded by Douglas Stolberg, the head of Commercial and Institutional Banking to Alexander Flockhart, then a senior executive in Retail and Commercial Banking at HBUS. Stolberg noted: "As we discussed previously, Compliance has raised some concerns regarding the ongoing maintenance of operating/clearing accounts for Al Rajhi group." He forwarded recommendations on how to handle the account: "Retain [International Private Banking] as the relationship manager domicile for continuity purposes, and as we understand there is interest in further developing private banking business with family members. ... Domicile the actual accounts with Delaware where HBUS's most robust account screening capabilities reside."

"Screening capabilities" which could be shielded from nosy regulators due to Delaware's strict bank secrecy laws.

Stolberg went on to state: "[T]his has become a fairly high profile situation. Compliance’s concerns relate to the possibility that Al Rajhi's account may have been used by terrorists. If true, this could potentially open HBUS up to public scrutiny and/or regulatory criticism. SABB [Saudi British Bank] are understandably keen to maintain the relationships. As this matter concerns primarily reputational and compliance risks, we felt it appropriate for SMC [Senior Management Committee] members to be briefed ... so that they may opine on the acceptability of the plan. Please advise how you would prefer us to proceed." (emphasis added)

According to Senate staff, "Mr. Harpster reported a week later that Mr. Flockhart had decided to transfer the accounts to HBUS in the Delaware office."

But HSBC weren't the only entities hoping to curry favor with the Kingdom. A 2009 Government Accountability Office (GAO) report went on to note that "certain performance targets set by the State Department had been dropped in 2009, such as the establishment of a Saudi Commission on Charities to oversee actions taken by Saudi charities abroad as well as certain regulations of cash couriers."

Although GAO "recommended that the United States reinstate the dropped performance targets to prevent the flow of funds from Saudi Arabia 'through mechanisms such as cash couriers, to terrorists and extremists outside Saudi Arabia,' the State Department's "most recent annual International Narcotics Control Strategy Report contains no information about Saudi Arabia's anti-money laundering or terrorist financing efforts."

One reason why the State Department's report contains "no information" just might be the Obama administration's policy of supporting Saudi-backed Salafi terrorists soon to come online in Libya and Syria, financed through "Saudi charities abroad" or more directly through "cash couriers."

'You'd better be making lots of money!'

The Senate disclosed that HSBC "provided Al Rajhi Bank with a wide range of banking services, including wire transfers, foreign exchange, trade financing, and asset management services."

"In the United States," investigators learned that "a key service was supplying Al Rajhi Bank with large amounts of physical U.S. dollars, through the HBUS U.S. Banknotes Department."

"The physical delivery of U.S. dollars to Al Rajhi Bank was carried out primarily through the London branch of HBUS, often referred to internally as 'London Banknotes'."

Indeed, "HBUS records indicate that the London Banknotes office had been supplying U.S. dollars to Al Rajhi Bank for '25+ years.' In addition to the London branch, HBUS headquarters in New York opened a banknotes account for Al Rajhi Bank in January 2001. The U.S. dollars were physically delivered to Al Rajhi Bank in Saudi Arabia."

"On one occasion in 2008," Senate staff reported, the head of HSBC Global Banknotes Department told a colleague: 'In case you don't know, no other banknotes counterparty has received so much attention in the last 8 years than Alrajhi.' Despite, in the words of the KYC client profile, a 'multitude' of allegations, HSBC chose to provide Al Rajhi bank with banking services on a global basis."

Even though the Al Rajhi Bank "had not been indicted, designated a terrorist financier, or sanctioned," HSBC's Group Compliance section recommended that affiliates should sever their ties.

After that initial decision however, "HSBC affiliates disregarded the recommendation and continued to do business with the bank, while others terminated their relationships but protested HSBC's decision and urged HSBC to reverse it."

Complaints by lower level staff continued, disregarded by higher-ups, even though a U.S. indictment was issued in February 2005 for two individuals "accused among other matters, of cashing $130,000 in U.S. travelers cheques at Al Rajhi Bank in Saudi Arabia" and then smuggling the cash to CIA-backed terrorists in Chechnya.

Although internal bank documents showed that officials decided to cut their ties to the Saudi financial institution, they reversed themselves when pressure was brought to bear by Al Rajhi officials. Between 2006 and 2010, Al Rajhi received shipments totaling more than $1 billion in physical cash in the lucrative banknotes business from HSBC's U.S. affiliate according to investigators. Officials at the Saudi bank "had threatened to pull all of its business from HSBC if the U.S. banknotes business were not restored."

Senate staff reported that on January 4, 2005, "HBUS AML Compliance head Ms. Pesce sent an email to Daniel Jack, an HBUS AML Compliance Officer who often dealt with the London Banknotes office, instructing him to: '[p]lease communicate that Group Compliance will be recommending terminating the Al Rajhi relationship.' Mr. Jack inquired as to when that recommendation would be made. She responded: 'I expect to see an email from Susan Wright today. She tells me that HBME [HSBC Bank Middle East] does not agree with Compliance and will not be terminating the relationship from the Middle East, but she/David B[agley] recommend that in light of US scrutiny, climate, and interest by law enforcement, we in the US sever the relationship from here'."

At the time, Susan Wright was "the Chief Money Laundering Control Officer for the entire HSBC Group. She reported to David Bagley, head of the HSBC Group's overall Compliance Department."

Senate investigators noted that the "documents do not explain why HSBC Middle East disagreed with the decision or why it was allowed to continue its relationship with Al Rajhi Bank, when HSBC's Group Compliance had decided to sever the relationship between the bank and other HSBC affiliates due to terrorist financing concerns."

It soon became clear however, that "HSBC Group Compliance began to narrow its scope." Shortly thereafter a trader in the Banknotes department wrote, "for us is business as usual." Alan Ketley, HBUS AML Compliance Officer commented on the decision not to include Al Rajhi Trading in their earlier decision to sever all ties: "Looks like you're fine to continue dealing with Al Rajhi. You'd better be making lots of money!"

Meanwhile, "Al Rajhi Bank communicated the threat to 'pull any new business with HSBC' unless given a 'satisfactory explanation' why HSBC had stopped supplying it with U.S. dollars via its relationship managers," the Senate disclosed.

In short order, it was business as usual.

Despite continuing allegations of terrorist financing swirling around Al Rajhi Bank, HBUS "continued to supply, through its London branch, hundreds of millions of U.S. dollars to Al Rajhi Bank in Saudi Arabia. In addition, at Al Rajhi Bank's request, HBUS expanded the relationship in January 2009, by authorizing its Hong Kong branch to supply Al Rajhi Bank with non-U.S. currencies, including the Thai bat, Indian rupee, and Hong Kong dollar." (emphasis added)

When concerns were raised internally once again, Christopher Lok, the head of HSBC's Global Banknotes Department in New York fired back: "This is an on-going debate that will never go away. My stance remains the same, i.e. until it[']s proved we cannot simply rely on the Wall Street Journal['s] reports and unconfirmed allegations and 'punish’ the client'."

Needless to say, Hong Kong's "arrangement" with Al Rajhi went forward.

Despite "troubling information" which should have led to HSBC's quick exit from the banknotes market, the Senate reported that "HBUS continued to supply U.S. dollars to the bank, and even expanded its business, until 2010, when HSBC decided, on a global basis, to exit the U.S. banknotes business."

• • •

In conclusion, one needn't be a "conspiracy buff" to posit a link from HSBC to Al Rajhi to "cash couriers" operating across the Middle East in support of a multitude of U.S.-Saudi-backed "regime change" gambits in play today; policies which "worked marvelously well in Afghanistan against the Red Army."

As investigative journalist Ed Vulliamy pointed out in The Observer, the issues involved here are wider than drug money laundering or terrorist finance. "It is about where banks, law enforcement officers and the regulators--and politics and society generally--want to draw the line between the criminal and supposed 'legal' economies."

Commenting on the HSBC scandal, Robert Mazur, a former Customs Department deep-cover specialist and author of The Infiltrator, who penetrated Medellín cartel money laundering operations during the prosecution and collapse of BCCI in 1991, told The Observer that "the only thing that will make the banks properly vigilant to what is happening is when they hear the rattle of handcuffs in the boardroom."

"The stark truth is," Vulliamy wrote, "the notion of any dichotomy between the global criminal economy and the 'legal' one is fantasy. Worse, it is a lie. They are seamless, mutually interdependent--one and the same."

NSA Spying: 'If We Tell You, We'll Have to Kill You'

When Congress passed the FISA Amendments Act (FAA) in 2008, a privacy-killing law that gutted First, Fourth and Fifth Amendment protections for Americans while granting immunity to giant telecoms that assisted the National Security Agency's (NSA) warrantless wiretapping programs, we were assured that the government "does not spy" on our communications.

Yet scarcely a year after FAA was signed into law by President Bush, The New York Times revealed that under Hope and Change™ huckster Barack Obama, NSA continued the previous regime's illegal practices, intercepting "private e-mail messages and phone calls of Americans in recent months on a scale that went beyond the broad legal limits established by Congress last year."

The wholesale vacuuming-up of private communications by the sprawling Pentagon bureaucracy were described by unnamed "senior officials" as the "'overcollection' of domestic communications of Americans;" in other words, a mere technical "glitch" in an otherwise "balanced" program.

But what most Americans are blissfully unaware of is the fact that they carry in their pockets what have been described as near-perfect spy devices: their cellphones.

Earlier this week, The New York Times disclosed that "cellphone carriers reported that they responded to a startling 1.3 million demands for subscriber information last year from law enforcement agencies seeking text messages, caller locations and other information in the course of investigations."

The report by carriers, made in response to congressional inquiries "document an explosion in cellphone surveillance in the last five years, with the companies turning over records thousands of times a day in response to police emergencies, court orders, law enforcement subpoenas and other requests."

"I never expected it to be this massive," said Rep. Edward J. Markey (D-MA), the co-chair of the Bipartisan Congressional Privacy Caucus, "who requested the reports from nine carriers, including AT&T;, Sprint, T-Mobile and Verizon."

Markey told the Times that the prevalence of cellphone surveillance by law enforcement agencies raised the specter of "digital dragnets" that threaten the privacy of most customers.

While the sheer volume of requests by local, state and federal police for user data may have startled Congress, which by-and-large has turned a blind eye when it comes to privacy depredations at all levels of government, it is hardly a complete picture of the pervasive nature of the problem.

In 2009 security watchdog Christopher Soghoian reported on his Slight Paranoia web site that just one firm, Sprint Nextel, "provided law enforcement agencies with its customers' (GPS) location information over 8 million times between September 2008 and October 2009. This massive disclosure of sensitive customer information was made possible due to the roll-out by Sprint of a new, special web portal for law enforcement officers." (emphasis added)

According to Soghoian, "Internet service providers and telecommunications companies play a significant, yet little known role in law enforcement and intelligence gathering."

"Government agents routinely obtain customer records from these firms," Soghoian averred, "detailing the telephone numbers dialed, text messages, emails and instant messages sent, web pages browsed, the queries submitted to search engines, and of course, huge amounts of geolocation data, detailing exactly where an individual was located at a particular date and time."

While there are indeed "exigent circumstances" which may require law enforcement to demand instant access to GPS data or other customer records--a kidnapping or child abduction in progress--in the main however, it appears that most warrant-free requests fall under a more sinister category: fishing expedition.

Commenting on congressional revelations, ACLU legislative counsel Christopher Calabrese informed us that data supplied to the Times represents "a vast undercount of the number of Americans who have been affected by this tracking. Sprint disclosed that it received approximately 500,000 subpoenas in 2011 (a subpoena is a written request for information from law enforcement that isn't reviewed by a judge) and that 'each subpoena typically requested subscriber information on multiple subscribers.' In addition, several carriers disclosed that they sometimes provide all the information from a particular cell tower or particular area."

Although several geolocation privacy bills that require warrants to obtain records are pending in Congress, it should be clear there is no consensus among ruling class elites for protecting the privacy rights of Americans or reining-in overly-intrusive police agencies.

In fact, the opposite is the case.

Under Obama, illegal surveillance programs once hidden behind code-named black projects such as STELLAR WIND and PINWALE have been greatly expanded. Indeed, the bipartisan consensus which encourages and permits the secret state to carry out warrantless wiretapping and data mining have been "regularized" to such a degree (under the rubric of "keeping us safe") they're no longer even regarded as controversial.

More than three years ago, Obama promised to "fix" illegal policies which surfaced under the previous Bush government. However, an anonymous "senior official" told the Times there were certain "technical problems" that led the agency "to inadvertently 'target' groups of Americans and collect their domestic communications without proper court authority. Officials are still trying to determine how many violations may have occurred."

It was further revealed that some of the groups "inadvertently" targeted by NSA and other spy satrapies (CIA, DHS, FBI, et. al.) included Muslim Americans, anarchist and socialist groups, libertarians, civil liberties organizations, antiwar activists as well as individual supporters of the secrecy-spilling web site WikiLeaks.

Just last week the Bradley Manning Support Network disclosed that "A letter dated May 18, 2012, which purports to originate from the US Army Criminal Investigative Division (CID), rejects a Freedom of Information Act (FOIA) request submitted for data the government has collected on the Bradley Manning Support Network. The letter states that 'an active investigation is in progress with an undetermined completion date'."

As readers recall, Manning is the Army private accused by the government of releasing hundreds of thousands of secret files to WikiLeaks. He currently faces charges that could lead to decades of incarceration.

"At this time," Network supporters wrote, "it is unclear whether the investigation cited in the FOIA denial simply refers to the government's ongoing legal retaliation against Bradley Manning, or whether there is actually some other separate investigation targeting the Support Network."

It's a sure bet, given the administration's ongoing war against whistleblowers, that the Army as well the Justice Department has the Manning Support Network--along with WikiLeaks--in their gun sights.

And with the construction of NSA's giant $2 billion Utah Data Center nearing completion, as James Bamford reported in Wired Magazine in March, the agency's ability "to intercept, decipher, analyze, and store vast swaths of the world's communications as they zap down from satellites and zip through the underground and undersea cables of international, foreign, and domestic networks" will soon take a qualitative leap forward--at our expense.

With FAA currently up for renewal, and with congressional grifters on both sides of the aisle pushing for a five-year, amendment-free extension as demanded by the administration, the secret state is refusing to provide privacy advocates--both in and outside government--with any information whatsoever on how just many violations have occurred on a regular basis under the law's admittedly loose guidelines.

In May, senators Ron Wyden (D-OR) and Mark Udall (D-CO), members of the Senate Select Committee on Intelligence asked NSA to divulge information about how many Americans communications have been spied upon by the agency.

The Office of the Director of National Intelligence responded by saying that it was "not reasonably possible to identify the number of people located in the United States whose communications may have been reviewed under the authority of the FAA."

Both senators oppose FAA's extension on civil liberties grounds and in the face of the government's stonewall, Wyden placed a "hold" on the legislation.

In a statement published on his web site Wyden explained why he was blocking unanimous consent requests to pass FAA's five-year extension.

"The purpose of this 2008 legislation was to give the government new authorities to collect the communications of people who are believed to be foreigners outside the United States, while still preserving the privacy of people inside the United States," Wyden wrote.

"Before Congress votes to renew these authorities it is important to understand how they are working in practice. In particular, it is important for Congress to better understand how many people inside the United States have had their communications collected or reviewed under the authorities granted by the FISA Amendments Act."

"I am concerned, of course, that if no one has even estimated how many Americans have had their communications collected under the FISA Amendments Act," Wyden averred, "it is possible that this number could be quite large. Since all of the communications collected by the government under section 702 are collected without individual warrants, I believe that there should be clear rules prohibiting the government from searching through these communications in an effort to find the phone calls or emails of a particular American, unless the government has obtained a warrant or emergency authorization permitting surveillance of that American."

Ludicrously enough, in response to the senator's requests I. Charles McCullough, the Inspector General of the Office of the Director of National Intelligence wrote that the NSA Inspector General "and NSA leadership agreed that an IG review of the sort suggested would itself violate the privacy of U.S. persons." (emphasis added)

McCullough's irony-rich obfuscation, published by Wired, argued that even providing an estimate on how many Americans were spied upon would be "beyond the capacity" of the NSA's in-house watchdog. "I defer to [the NSA inspector general's] conclusion that obtaining such an estimate was beyond the capacity of his office and dedicating sufficient additional resources would likely impede the NSA's mission."

Just as the Bush administration scotched citizen lawsuits that demanded accountability from the nation's telecommunication providers over their collaboration with NSA's illegal programs, so too has the Obama regime sought to derail government accountability by invoking an alleged "state secrets privilege."

Recently, the Electronic Frontier Foundation reported that "Three whistleblowers--all former employees of the National Security Agency (NSA)--have come forward to give evidence in ... EFF's lawsuit against the government's illegal mass surveillance program, Jewel v. NSA."

In a July 2 motion filed in U.S. District Court in San Francisco, "the three former intelligence analysts confirm that the NSA has, or is in the process of obtaining, the capability to seize and store most electronic communications passing through its U.S. intercept centers, such as the 'secret room' at the AT&T; facility in San Francisco first disclosed by retired AT&T; technician Mark Klein in early 2006."

Those three former NSA officials--William E. Binney, Thomas A. Drake and J. Kirk Wiebe--were themselves targets of government persecution over allegations that they provided information to The New York Times in their 2005 revelation of illegal domestic spying by the Agency.

Drake, who pled guilty last year to a misdemeanor after the Justice Department's Espionage Act charges collapsed, was initially prosecuted by the administration--as a spy no less--for providing evidence to The Baltimore Sun of massive waste, fraud and corruption in NSA's Trailblazer program.

The $1.2 billion corporate boondoggle, overseen by the Science Applications International Corporation (SAIC) and project partners Boeing, Computer Sciences Corporation and Booz Allen Hamilton was eventually shut down in 2006.

In the wake of initial reporting by the Times, USA Today disclosed that NSA "has been secretly collecting the phone call records of tens of millions of Americans, using data provided by AT&T;, Verizon and BellSouth."

In fact, the same firms who assisted the Agency in creating "'a database of every call ever made' within the nation's borders," are busy as proverbial bees providing geolocational information to law enforcement and secret state agencies.

As EFF averred, "Jewel v. NSA is back in district court after the 9th U.S. Circuit Court of Appeals reinstated it in late 2011. In the motion for partial summary judgment filed today, EFF asked the court to reject the stale state secrets arguments that the government has been using in its attempts to sidetrack this important litigation and instead apply the processes in the Foreign Intelligence Surveillance Act that require the court to determine whether electronic surveillance was conducted legally."

While EFF should be commended for their efforts, prospects for a full accounting of serious state constitutional violations of Americans' right face an uphill battle.

As the World Socialist Web Site pointed out Monday, "The latest revelations about cell phone monitoring, when added to the long record of antidemocratic attacks carried out since the declaration of the 'war on terror'--from the establishment of the Guantanamo Bay prison camp to the Obama administration's assertion of the right to summarily execute anyone, including US citizens, anywhere in the world—provide chilling evidence of the real and growing threat of an American police state."

Efforts in that direction by the Obama administration are gathering steam.

The Electronic Privacy Information Center (EPIC) also reported Monday that "The White House has released a new Executive Order seeking to ensure the continuity of government communications during a national emergency."

That Executive Order, issued July 6 by the White House, grants new powers to the Department of Homeland Security, "including the ability to collect certain public communications information," EPIC averred.

But it does far more than that. "Under the Executive Order the White House has also granted the Department the authority to seize private facilities when necessary, effectively shutting down or limiting civilian communications."

As researcher Peter Dale Scott disclosed in numerous analyses on so-called "Continuity of Government" planning, COG is code for the suspension of constitutional guarantees and the imposition of martial law by the National Security State.

In 2010, Scott pointed out in Japan Focus: "Clearly 9/11 met the conditions for the implementation of COG measures, and we know for certain that COG plans were implemented on that day in 2001, before the last plane had crashed in Pennsylvania. The 9/11 Report confirms this twice, on pages 38 and 326. It was under the auspices of COG that Bush stayed out of Washington on that day, and other government leaders like Paul Wolfowitz were swiftly evacuated to Site R, inside a hollowed out mountain near Camp David."

In fact, the first ninety days after 9/11 "saw the swift implementation of the key features attributed to COG planning ... in the 1980s: warrantless detentions, warrantless deportations, and the warrantless eavesdropping that is their logical counterpart. The clearest example was the administration's Project Endgame--a ten-year plan, initiated in September 2001, to expand detention camps, at a cost of $400 million in Fiscal Year 2007 alone. This implemented the central feature of the massive detention exercise, Rex 84, conducted by Louis Giuffrida and Oliver North in 1984."

The proposed five-year extension of the FISA Amendments Act, coupled with indefinite detention provisions of the 2012 National Defense Authorization Act (NDAA), the president's "kill list" and now, a new Executive Order granting DHS the power to "seize" private communications' facilities in the wake of a "national emergency" have accelerated these dictatorial trends.