HSBC Accused of Money Laundering for Drug Cartels and Terrorist Groups

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Europe’s largest bank, HSBC, has been investigated for alleged money-laundering offences involving Iran, drug cartels and terrorists.

In a 340-page report released ahead of a US Senate hearing on Tuesday, it is alleged that the HSBC’s lax controls saw the bank launder billions of dollars for accounts linked to drug cartels and terrorist groups.  

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The scathing report comes at a difficult time for the British banking sector, which is having its standards and practices scrutinised by regulators and policy makers.

Last month, rival British bank Barclays agreed to pay a $453 million settlement for rigging the benchmark lending rate known as LIBOR.

The year-long inquiry included a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators, and the findings will take centre stage at a hearing scheduled to begin today.

Money laundering takes profits from the trafficking of drugs, arms or other illicit activities and passes them through bank accounts to disguise the illegal activity.

"We ... recognize that our controls could and should have been stronger and more effective in order to spot and deal with unacceptable behaviour," HSBC statement said.

The Bank added:


We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong.

The bank’s failures included an inability to properly monitor $15 billion in bulk cash transactions between mid-2006 and mid-2009, inadequate staffing and high turnover in the bank's compliance units, the report said.

Between 2007 and 2008, HSBC's Mexican operations moved $7 billion into the bank's U.S. operations. According to the report, both Mexican and U.S. authorities warned HSBC that the amount of money could only have reached such a level if it was tied to illegal narcotics proceeds.

The Middle Eastern branch of HSBC was also probed for its links with the Al Rajhi Bank, which the report said was linked to terrorist groups.

The Senate report also had strong criticism of the Office of the Comptroller of the Currency, who had failed to properly monitor the activities of HSBC. According to report, the US regulator had known of the bank’s poor systems but failed to take remedial actions.

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