Top HSBC boss David Bagley quits over money laundering

Senior executive resigns over 'polluted culture of profit'

A senior HSBC executive resigned in front of a Congressional committee last night, moments after senators accused the bank of laundering money for "drug kingpins" and rogue states such as Iran and Syria.

Members of Congress attacked the bank for exposing the US to billions of dollars of drug money and terrorist financing. The moment of theatre came as HSBC confessed to years of failure to comply with rules to prevent money laundering. David Bagley, who has been HSBC head of group compliance since 2002, said that "despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators … I recommended to the group that now is the appropriate time for me and for the bank, for someone new to serve as the head of group compliance."

A damning new report says HSBC had a "pervasively polluted" culture of putting profit ahead of the law. The report, by the Senate Homeland Security Committee, raises questions over the conduct of Lord Green, now minister for Trade and Investment, who ran HSBC for most of the last decade, when the failures occurred.

Carl Levin, whose sub-committee penned the report, responded to the dramatic resignation by saying: "That's good news."

The 340-page report revealed that billions of dollars of cash was transported between HSBC banks in the US and Mexico, and that the bank raised no red flags when international businessmen cashed in millions of dollars in travellers cheques, among a litany of failings. The underfunded compliance department at one point had a backlog of 17,000 suspect transactions still to be reviewed, and staff were warning it was "only a matter of time" until the bank faced criminal action.

Lord Green ran HSBC from 2003 as it expanded around the globe, including in Latin America, where some of the worst abuses were uncovered. Stuart Gulliver, who took over as chief executive at the start of last year, effectively disowned the Green regime last week, telling staff in a memo that "our anti-money-laundering controls should have been stronger and more effective and we failed to spot and deal with unacceptable behaviour" for most of the last decade".

The Senate panel found that Lord Green regularly discussed compliance issues, including concern about sanctions busting. Emails show he discussed how to keep doing international business with Iran, despite tightening US sanctions. Underlings stripped transactions of details about their country of origin, so as not to trigger extra paperwork in the US.