In the Media

HSBC investigation: Mexican subsidiary investigated over money laundering claims

PUBLISHED November 8, 2012

The bank, which has its headquarters in London, was investigated by the US Senate which claimed that its subsidiary in Mexico had allowed people to "shift potentially illicit sums" around the world.

This week, HSBC announced it had set aside around $1.5 billion (£938 million) to cover fines from US authorities.

The Senate spent a year investigating the bank's international operations. Its report accused HSBC of "playing fast and loose with US banking rules", while exposing the US financial system to a "wide array of money laundering, drug trafficking, and terrorist financing risks".

"Foreign HSBC banks actively circumvented US safeguards at [US HSBC] designed to block transactions involving terrorists, drug lords, and rogue regimes," the Senate's report stated.

Some of the most serious problems were identified at HSBC's Mexican subsidiary, which was alleged to have been allowed "to operate with multiple anti-money laundering deficiencies ... for years".

US law enforcement officials found that traffickers began transporting large volumes of US currency to Mexico and depositing dollars at Mexican financial institutions. The institutions then shipped the physical dollars back to the US. The money was therefore "cleared" in Mexico before entering America.

HSBC's Mexican affiliate transferred billions of dollars in notes from Mexico to the US operation for years. For example, during 2008, the Mexican affiliate transferred $4 billion to the US division. In one three-month period from November 2006, it moved nearly $742 million in dollars in armed cars or aircraft.

HSBC continued to rate Mexico as a low risk country for money-laundering from 2002 until 2009.

The Senate investigation also raised questions about Lord Green, the British trade minister who was HSBC's chief executive until joining the government in 2010. Lord Green was warned about serious problems in the Mexican operation in 2005 by a whistleblower, but HSBC "made no effort to identify any suspicious activity [until] mid-2009," the report noted.

HSBC's dealings with the Iranian regime were also heavily criticised by the Senate. It was alleged that in order to avoid triggering US checks on Iranian transactions, HSBC's Europe division "systematically altered transaction information to strip out any reference to Iran and characterised the transfers as between banks in approved jurisdictions".

The Senate also accused HSBC of turning a blind eye to dealings with banks with terrorist links in the Middle East.

The bank has issued a series of detailed apologies for its conduct.

A senior executive at HSBC had said that unacceptable behaviour had not been spotted and dealt with. He added that the bank would insist on "a single standard" across its worldwide operations" that would be set by the highest standard anywhere.