HSBC: Under Investigation for Money Laundering

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HSBC (LSE:HSBA) has confirmed an investigation has been launched by the US regulators on possible breaches in the Anti-Money Laundering and Bank Secrecy Acts.

Spokersperson for HSBC, Robert Shermann, stated the US division of the UK-based bank is having ongoing discussions with officials on a number of regulatory and compliance matters.

“The nature of these discussions is confidential; in all cases, we are cooperating,” he added.

In the third quarter report of HSBC Bank USA, the company admitted they are the subject of ongoing investigations, including “Grand Jury subpoenas and other requests for information by US government and state agencies, including the US Attorney’s office, the US Department of Justice, the US Senate Permanent Subcommittee on Investigations, the Securities and Exchange Commission and the New York County District Attorney’s Office.”

According to the statement, the investigations pertain to HSBC’s bank note business, dollar clearing services and their compliance with BSA and AML controls. They also include the bank’s compliance with the requirements of the Office of Foreign Assets Control (OFAC) and adherence to US tax reporting requirements by certain clients of the bank.

The investigations cover HSBC Bank USA and HSBC North America, which has entered into a cease and desist order with the Office of the Comptroller of the Currency (OCC) and the Federal Reserve to ensure effective compliance risk management program across the HSBC operations in the United States.

There was no comment from the Senate Subcommittee regarding the news.

Subject of Numerous Investigations

HSBC has been a subject of several investigations in the past relating to alleged money laundering activities that enabled politically exposed persons (PEPs) to route money to the US financial system. In 2010, HSBC was allegedly providing banking services to officials of Angola’s national oil company with known ties to the Angolan government, but did not mark the transactions as potentially high risk.

During the same year, the OCC ordered the bank to clean up its money laundering prevention system and hire a permanent regional compliance officer to submit full compliance plans to police against improper money flows. This was a result of the investigation of OCC identifying deficiencies in their money laundering prevention practices in connection with several businesses that routed cash for clients and other banks.

As early as 2003, the US subsidiary has been in talks with the Federal Bank of New York and New York’s state banking regulator to improve its compliance with money laundering prevention requirements.

HSBC Cooperation

A number of changes in HSBC’s structure have been initiated, with previous government officials appointed to key positions in the bank. Stuart Levey from the US Treasury Department was named Chief Legal Officer of HSBC to show their willingness to combat money laundering.

Mr Sherman, speaking on behalf of HSBC, said the bank acknowledged falling short of their own expectations and are working to resolve the issues.  The company announced divestiture of several operations in the US, including selling their credit card business and bank branches.

In its third quarter statement, HSBC said, “we are cooperating fully and engaging in efforts to resolve these matters”.  HSBC has invested in new staff, a newer money laundering prevention system, an improved compliance helpline, and a more extensive training programme for all US employees.

Company Spotlight

HSBC is one of the largest banking and financial services organisations in the world with some 7,500 offices in more than 80 countries spread across Europe, Asia-pacific, the Americas,Middle East, and Africa.

 Company History
↑ Form 10-Q – Third Quarter Ending 30 September 2011
 US probe into HSBC ‘money laundering’
↑ U.S. regulators probe HSBC for money-laundering
↑ Exclusive: Senate investigating HSBC for money laundering
↑ US Senate investigating HSBC for money laundering
 About HSBC

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