Another day, another banking scandal. This one involves (that we know of) HSBC, Europes largest bank, that operates in over 80 countries. The allegations are for laundering money.....lots of money.......dirty money. HSBC executives are scheduled to meet before the Senate today and are expected to apologize for getting caught. The bank expects to be held accountable for what went wrong....which was getting caught.
Before the hearing, the bank released the following statement.
We will apologize, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong. We believe that this case history will provide important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system.Let's look into what they got caught doing:
Here's a list of what went wrong.....
Mexican Drug Cash -
HSBC accepted more than $15 billion in cash from subsidiaries in Mexico, Russia and other countries at high risk of money laundering but failed to conduct any monitoring of these bulk cash transactions between mid-2006 and mid-2009.Mr Ye Gon is in jail......HSBC executives?
Furthermore, the report found that HSBC knew of lax anti-money laundering practices at its Mexican subsidiary HBMX which had dated back to its purchase in 2002.
HBMX was warned, on at least two occasions, by Mexican authorities that drug money was probably being laundered through HBMX accounts.
The report names individual cases such as that of Chinese-Mexican citizen, Zhenly Ye Gon.
Mr Ye Gon, and his three Mexican pharmaceutical firms including Unimed Pharmaceutical were long-standing clients of HBMX.
In 2007, a joint operation between the Mexican government and US Drug Enforcement Agency seized more than $205m in cash at Mr Ye Gon's residence - described as the largest drug-related cash seizure in history - along with $17m in Mexican pesos, firearms, and international wire transfer records.
Mr Ye Gon is currently in a US prison awaiting extradition to Mexico on charges relating to the import, manufacture, and sale of chemicals to drug cartels for use in manufacturing methamphetamine.
Many of HSBC's breaches of US anti-money laundering relate to its use of bearer share accounts. Under the rules for these accounts, ownership of shares and the income they incur can be passed from person to person in secrecy.Assor and Levy are in jail.....HSBC executives?
HSBC's US subsidiary HBUS had opened more than 2,550 accounts for bearer share corporations.
These businesses are commonly set up in tax havens such as the British Virgin Islands.
Most of the bearer share accounts - some 1,670 - were opened at the Miami office of HBUS.
At their peak, these Miami accounts held $2.6bn of assets and generated annual revenues of $26m.
The report highlights the case of Miami Beach hotel developers, Mauricio Cohen Assor and Leon Cohen Levy.
The father and son used HBUS accounts opened under the names Blue Ocean Finance Ltd. and Whitebury Shipping Time-Sharing Ltd. to help hide $150m in assets and $49m of income.
The pair were jailed for 10 years for criminal tax fraud and filing false tax returns in 2010.
The US division of HSBC bank provided money to some banks in Bangladesh which are believed to have helped fund al-Qaeda.What can one say about this? We are in a "Global War on Terror" fighting Al Qeada - thousands have died in this fight, thousand are jailed....and HSBC executives?
Among the executives who will appear is HSBC's chief legal officer Stuart Levey, who joined the bank in January and was previously one of the top officials on terrorism and finance at the US Treasury Department.Looks like HSBC made sure to cover their bases by hiring insiders from the US Government.
The head of the Office of the Comptroller of the Currency, Thomas Curry, will also testify.
In a memo released ahead of the hearing, HSBC chief executive Stuart Gulliver said: "It is right that we will be held accountable and that we take responsibility for fixing what went wrong.
"As well as answering the subcommittee's questions, we will explain the significant changes we have already made to strengthen our compliance and risk management infrastructure and culture," he said.
HSBC could face a record $1 billion fine following an investigation by U.S. authorities into breakdowns in money laundering prevention.Wow....a billion dollars - sounds like a lot of money....but who's money? HSBC's net income last year was $16.8bn. It operates in about 80 countries around the world. Its US division is among the top 10 banks operating in the United States. It has assets of roughly $210bn in its US operations.
Again...and the penalty for HSBC executives?