HSBC: Under Investigation for Money Laundering

PUBLISHED: Jan 26 2012 @ 08:49 | Comments (0) | More info about Kenneth G. Mondero

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.

References
↑ 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

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

Follow @kennethgmondero

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Plc. ADVFN Plc does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.