What’s HSBC done wrong?
Put simply, HSBC was not rigorous enough in preventing money laundering through its banks. Last week, the United States Senate’s Permanent Subcommittee on Investigations released a damning report finding that HSBC had ‘exposed the US financial system to a wide array of money laundering, drug trafficking, and terrorist financing risks due to poor anti-money laundering controls’.
In particular, the committee criticised the way HSBC treated its Mexican arm. HSBC Mexico, the report says ‘operated in Mexico, a country under siege from drug crime, violence and money laundering; it had high risk clients, such as Mexican casas de cambios [bureaux de change] and US money service businesses; and it offered high risk products, such as US dollar accounts in the Cayman Islands’. HSBC should have treated it as ‘a high risk correspondent client subject to enhanced due diligence and monitoring’. Instead, from 2002 to 2009, HSBC US gave Mexico its lowest rating for risk of money laundering. In 2007 and 2008, HSBC Mexico shipped $7 billion in cash to the US. And this was despite warnings about the risk of money laundering from the US State Department and others.
The report also shows that HSBC frequently circumvented US rules preventing companies from doing business with ‘rogue jurisdictions’ such as Iran and North Korea. It also criticises HSBC for continuing to do business with the Saudi Arabian bank Al Rajhi — even after evidence emerged linking it to terrorists, including al-Qaeda — and for clearing $290 million in ‘obviously suspicious’ travellers cheques for Japanese bank Hokuriku from 2005 to 2008.
Senator Carl Levin, chairman of the subcommittee, summed up thus: ‘HSBC’s compliance culture has been pervasively polluted for a long time.’
HSBC has accepted the report’s findings and apologised. Stuart Gulliver, the current chief executive, said:
‘Between 2004 and 2010, our anti-money laundering controls should have been stronger and more effective and we failed to sport and deal with unacceptable behaviour… It is right that we be held accountable and that we take responsibility for fixing what went wrong.’
How’s a government minister involved?
Lord Green was chief executive of HSBC from June 2003 to May 2006, when he became group chairman — a position he held until stepping down in December 2010 to become the government’s Minister of State for Trade and Investment.
This has got Labour excited. Shadow Treasury minister Chris Leslie penned a letterto Green calling on him to ‘place on the record — at the earliest opportunity — an assurance that you took every appropriate step if and when you became aware of the issues raised by this report’ and asking him to answer a number of questions about his time in charge at HSBC. Lord Myners, City minister under Gordon Brown, said:
‘Lord Green should make a statement in the House of Lords and be called in front of the Treasury Select Committee. There were extensive and systemic failures of compliance at HSBC. These failures were clearly reported to the top of the bank where Lord Green was located. If he intends on remaining credible, he needs to clear his reputation.’
So what happened today?
Labour’s leader in the Lords, Baroness Royall, put forward a Private Notice Question asking the government ‘what assessment they have made of the impact of the allegations about HSBC’ on Lord Green’s ability to fulfil his ministerial duties.
In the debate this afternoon, Baroness Royall demanded that Lord Green ‘place on record what he knew and when’, adding ‘Would not such a move give Lord Green the opportunity to dispel once and for all the questions being asked about his ministerial role?’
But Lord Strathclyde, Leader of the Lords, was firm in dismissing her demands. ‘Her Majesty’s Government has every confidence in Lord Green’s ability to fulfil his ministerial duties,’ he said. ‘We have had many ministers who have had previous careers. No minister needs to be accountable to Parliament for his previous career.’
Comments