HSBC executives will face US lawmakers in Washington today after Senate investigators released a damning report detailing more than a decade of lax controls it says links Britain's biggest bank to money-laundering, terrorist funding, tax evasion and financial ties to Iran that violate US sanctions.
The Senate probe, which also lays heavy criticism on HSBC's prime US regulator, the Office of the Comptroller of the Currency (OCC), goes so far as to suggest that lawmakers consider revoking its charter to operate in the United States.
The 335-page report from the US Senate Permanent Subcommittee on Investigations, , which draws from 1.4m documents and interviews with 75 HSBC officials, describes a "pervasively polluted" culture and a "dramatic failure of accountability" at HSBC, according to Senator Carl Levin, the Committee's ranking lawmaker. His Committee accuses the bank of using a global network of branches and a US affiliate to create a gateway into the American financial system that led to more than $30bn in suspect transactions linked to drugs, terrorism and sanctioned companies in Iran, North Korea and Burma.
The report, compiled in conjunction with a sweeping investigation that involved the US Department of Justice, the Federal Reserve, the Manhattan District Attorney's Office and the OCC, says that between 2007 and 2008 more than $7bn was shipped from HSBC's Mexican operations, first set-up with purchase of Grupo Financiero Bital. HSBC's own anti-money laundering director was said to have expressed concern that as much as 70 percent of "laundered proceeds" in Mexico were running through the bank's affiliate.
Nearly $20bn in HSBC transactions were found to have involved Iran or Iranian companies, the report said, with as many as 90 percent of them having no disclosure of ties to the sanctioned regime. Similar transactions were found linking HSBC to businesses in the Sudan, Burma and North Korea.
Investigators also allege that more than a $1bn was shipped from the bank's US units to an affiliate in Saudi Arabia, Al Rajhi, which has ties to terrorist groups. The report revealed an HSBC attempt to cut ties with Al Rajhi in 2005, a decision which the bank reversed a few months later before exiting the business of shipping "bulk cash" in 2010.
Further allegations include the assistance of tax evasion for some US citizens through HSBC India.
HSBC CEO Stuart Gulliver said last week that the bank "failed to spot and deal with unacceptable behaviour." He vowed to change the culture of the bank while admitting "our anti-money laundering controls should have been stronger and more effective." The bank issued a statement late Monday which said the Senate report contained "important lessons for the whole industry in seeking to prevent illicit actors entering the global financial system".