HSBC is facing potentially explosive allegations that South American drug cartels have used it to launder money, and that the bank systematically and deliberately failed to install the systems needed to catch illegal transactions.
The scale of US authorities' investigations into HSBC has so far only been hinted at in the bank's regulatory filings, but leaked documents show that prosecutors are looking into a wide range of alleged failings.
In one instance, the bank allegedly failed to raise any red flags when Drug Enforcement Administration agents posed as drug dealers deposited millions of dollars in Paraguayan banks and then transferred money to accounts in the US through HSBC.
The bank also continues to do business with so-called "casas de cambio" in Mexico, local currency exchanges used to send money abroad, without any of the proper systems for spotting suspicious transactions, it is claimed. The casas are often used by the country's vicious drug gangs, the DEA believes.
Documents from an investigation by the US Attorney's office in West Virginia were reported yesterday by Reuters. In a letter urging the federal Department of Justice to take action, a West Virginia official claimed HSBC was to previous money laundering failures "as a nuclear waste dump is to a municipal land fill".
HSBC has disclosed that its internal controls are under investigation by the DoJ, the Federal Reserve, the Office of the Comptroller of the Currency, the Manhattan district attorney, the Office of Foreign Assets Control and the Senate Permanent Subcommittee on Investigations, and that criminal or civil penalties are likely.
"We continue to co-operate with officials in a number of ongoing investigations," HSBC said. "The details of those investigations are confidential, and therefore we will not comment on specific allegations."
These documents reportedly allege that from 2005, the bank violated the Bank Secrecy Act and other US anti-money laundering laws by not adequately reviewing hundreds of billions of dollars in transactions for any that might have links to drug trafficking, terrorist financing and other criminal activity.Reuse content