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.
“We will apologise, acknowledge these mistakes, answer for our actions and give our absolute commitment to fixing what went wrong,” the statement said.
The US justice department said it is conducting a criminal investigation into HSBC’s operations but declined to confirm that the bank is in settlement talks.
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.
The bank used its US operation as a “gateway” into the US financial system for other HSBC affiliates, Senator Carl Levin, the subcommittee’s chairman, told reporters Monday. Because of lax controls against money laundering, HSBC Bank USA “exposed the United States to Mexican drug money” and other suspicious funds, Levin said.
The report says the drug cartels laundered money through the bank’s US division from 2002 through 2009.