HSBC head of compliance stepping down
WASHINGTON – The chief compliance officer of big international bank HSBC says he is stepping down from that position after an investigation found that lax controls at the bank allowed Mexican drug cartels to launder billions of dollars through its U.S. operation and other illicit transactions.
David Bagley, the head of compliance for London-based HSBC Holdings, said in testimony at a hearing by the Senate Permanent Subcommittee on Investigations that he will leave that post but remain at HSBC.
Irene Dorner, president and CEO of HSBC Bank USA, said in testimony prepared for a hearing by the Senate Permanent Subcommittee on Investigations that "we deeply regret and apologize" for the lapses by HSBC; Bagley and other current and former executives of the bank said they weren't fully aware of illicit transactions flowing through the bank.
Senators expressed skepticism that they didn't know about problems that persisted for seven years. An investigation by the subcommittee found persistent problems at HSBC, which it said executives ignored.
Dorner and other HSBC executives scheduled to testify at Tuesday's hearing say the bank has made deep changes to its policies and corporate culture to prevent illicit use of the bank. "These changes will be embedded and sustained going forward," Dorner says.
The Senate panel's chairman, Sen. Carl Levin, D-Michigan, says HSBC's new policies "are all good steps."
London-based HSBC, which is Europe's largest bank, changed its senior management last year.
Levin said HSBC needs to identify which of its affiliates pose a high risk of problems and put them under close monitoring. The bank should consider closing the account of its Mexican affiliate, he said.
HSBC also should close its accounts with banks suspected of providing funding to terrorist groups, Levin said.
The subcommittee's extensive report on HSBC also says U.S. regulators knew the bank had a poor system to detect problems but failed to take action.
HSBC executives brushed off complaints from bank employees, so that the problems persisted for eight years, the report says.
In addition, some HSBC bank affiliates skirted U.S. government bans against financial transactions with Iran and other countries, according to the report. And HSBC's U.S. division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaida and other terrorist groups, the report said.
The U.S. Justice Department said it is conducting a criminal investigation into HSBC's operations but declined to confirm that the bank is in settlement talks.
HSBC's net income last year was $16.8 billion. It operates in about 80 countries around the world. Its U.S. division is among the top 10 banks operating in the United States. It has assets of roughly $210 billion in its U.S. operations.
Money laundering takes cash profits from the trafficking of drugs, arms or other illicit activities and passes them through legitimate bank accounts to disguise the illegal activity.
Levin also blasted the federal agency supervising the bank's U.S. operations, the Office of the Comptroller of the Currency. He said the agency "tolerated" HSBC's weak controls against money laundering for years.
Thomas Curry, who heads the Office of the Comptroller of the Currency, also was to testify at Tuesday's hearing.
Compliance with anti-money laundering laws "is crucial to our nation's efforts to combat criminal activity and terrorism," Curry said in a statement. He said the agency expects banks to have adequate programs in place to comply with the laws.
The Wall Street Journal reported Monday that the HSBC and the Justice Department have been in settlement talks and an accord could be struck within weeks.
Justice Department spokeswoman Alisa Finelli acknowledged that an investigation is under way but declined to comment on possible settlement discussions or a deal.
David Bagley, the head of compliance for London-based HSBC Holdings, said in testimony at a hearing by the Senate Permanent Subcommittee on Investigations that he will leave that post but remain at HSBC.
Irene Dorner, president and CEO of HSBC Bank USA, said in testimony prepared for a hearing by the Senate Permanent Subcommittee on Investigations that "we deeply regret and apologize" for the lapses by HSBC; Bagley and other current and former executives of the bank said they weren't fully aware of illicit transactions flowing through the bank.
Senators expressed skepticism that they didn't know about problems that persisted for seven years. An investigation by the subcommittee found persistent problems at HSBC, which it said executives ignored.
Dorner and other HSBC executives scheduled to testify at Tuesday's hearing say the bank has made deep changes to its policies and corporate culture to prevent illicit use of the bank. "These changes will be embedded and sustained going forward," Dorner says.
The Senate panel's chairman, Sen. Carl Levin, D-Michigan, says HSBC's new policies "are all good steps."
London-based HSBC, which is Europe's largest bank, changed its senior management last year.
Levin said HSBC needs to identify which of its affiliates pose a high risk of problems and put them under close monitoring. The bank should consider closing the account of its Mexican affiliate, he said.
HSBC also should close its accounts with banks suspected of providing funding to terrorist groups, Levin said.
The subcommittee's extensive report on HSBC also says U.S. regulators knew the bank had a poor system to detect problems but failed to take action.
HSBC executives brushed off complaints from bank employees, so that the problems persisted for eight years, the report says.
In addition, some HSBC bank affiliates skirted U.S. government bans against financial transactions with Iran and other countries, according to the report. And HSBC's U.S. division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaida and other terrorist groups, the report said.
The U.S. Justice Department said it is conducting a criminal investigation into HSBC's operations but declined to confirm that the bank is in settlement talks.
HSBC's net income last year was $16.8 billion. It operates in about 80 countries around the world. Its U.S. division is among the top 10 banks operating in the United States. It has assets of roughly $210 billion in its U.S. operations.
Money laundering takes cash profits from the trafficking of drugs, arms or other illicit activities and passes them through legitimate bank accounts to disguise the illegal activity.
Levin also blasted the federal agency supervising the bank's U.S. operations, the Office of the Comptroller of the Currency. He said the agency "tolerated" HSBC's weak controls against money laundering for years.
Thomas Curry, who heads the Office of the Comptroller of the Currency, also was to testify at Tuesday's hearing.
Compliance with anti-money laundering laws "is crucial to our nation's efforts to combat criminal activity and terrorism," Curry said in a statement. He said the agency expects banks to have adequate programs in place to comply with the laws.
The Wall Street Journal reported Monday that the HSBC and the Justice Department have been in settlement talks and an accord could be struck within weeks.
Justice Department spokeswoman Alisa Finelli acknowledged that an investigation is under way but declined to comment on possible settlement discussions or a deal.
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