HSBC faces money laundering accusations

Lax controls at Europe's largest bank, HSBC, allowed Mexican drug cartels to launder billions of dollars through its US operations, an investigation by the US senate has found.
The extensive report on London-based HSBC Holdings PLC by the Senate Permanent Subcommittee on Investigations also says US regulators knew the bank had a poor system to detect problems but failed to take action.

HSBC executives brushed off complaints from other bank employees, so that the problems persisted for eight years, the report says.
In addition, some HSBC bank affiliates skirted US government bans against financial transactions with Iran and other countries, according to the report.

And HSBC's US division provided money and banking services to some banks in Saudi Arabia and Bangladesh believed to have helped fund al-Qaeda and other terrorist groups, the report said.
The subcommittee released the report Monday ahead of a Tuesday hearing on the topic. HSBC released a statement saying its executives will offer a formal apology at the hearing.

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

Critics say the current furore over the manipulation of the Libor inter-bank interest rate is the latest example of a banking system in need of fundamental reform.

The report also concludes that the US bank regulator, the Office of the Comptroller of the Currency, failed to properly monitor HSBC.

The Senate's Permanent Subcommittee on Investigations, a Congressional watchdog that looks at financial improprieties, issued the report into HSBC.

The year-long inquiry, which included a review of 1.4 million documents and interviews with 75 HSBC officials and bank regulators, will be the focus of a hearing on Tuesday at which HSBC executives are scheduled to testify.

These will include 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.

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'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.

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.