July 17, 2012
In testimony before the Senate’s Permanent Subcommittee on Investigations, David Bagley, a compliance officer for HSBC Holdings, said the bank ignored “warning signs that violent drug gangs in Mexico, suspected terrorist financiers in the Middle East, and other rogue characters and enemy states may have been moving billions of dollars into and out of their vaults,” ABC News reports.
A Senate investigation concluded HSBC executives repeatedly ignored warning signs from their own compliance officers and government regulators and “watched what they believed to be billions of dollars in suspicious transactions passing through the bank without adequate scrutiny.”
HSBC supposedly ignored red flags when its Mexican affiliate moved $7 billion in physical U.S. dollars through the bank within a two-year peroid. It also allegedly ignored warnings that it was providing currency to a Saudi bank involved in financing al-Qaeda.
Jack Blum, a Washington attorney and noted expert on money laundering, told ABC he has never witnessed such an extreme case of failure, both by the bank and by regulators.
“This is an across the board, spectacular, total failure,” Blum said. “These are not minor, they are gross violations. You have to ask, what kind of management is this? What you come away with is that they cared about the bottom line. They did not care about obeying the law.”
According to the report, money laundering and other large scale criminal activity are normal business for large multinational banks.
“We have seen U.S. bank after U.S. bank involved in facilitating or turning a blind eye to criminal money coming in their doors, including the proceeds of corruption, terrorist financing and drug money,” said Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity.