Financial Transparency Coalition

LONDON – Today, Europe’s largest bank, HSBC, announced that it will pay $1.9 billion (£1.2 billion) to settle allegations that it laundered money for drugs cartels, terrorists and pariah states. During approximately the same period that HSBC failed to check whether the dollars it was shipping from Mexico to the US were drugs money, 47,000 people died at the hands of Mexican drugs traffickers.

“Fines alone are not going to change banks’ behaviour: the chances of being caught are relatively small and the potential profits from accepting dodgy clients are too big.  Fines are seen as a cost of doing business,” said Rosie Sharpe, campaigner at Global Witness.>

“Instead, regulators should hold senior bankers legally responsible for their banks’ money laundering performance.  At the very least, senior bankers should be prevented from working in the industry, akin to the way in which doctors can be struck off.  Bonuses should be clawed back, and, in the most serious cases, senior bankers should face jail,” said Sharpe.

According to the chair of the US Senate Subcommittee, HSBC’s culture was ‘pervasively polluted’.  The number of drugs cartels in Mexico makes it a high risk for money laundering.  HSBC Mexico had high risk clients such as money remitters and offered high risk products such as dollar accounts in the Cayman Islands.  Despite this, HSBC US treated its Mexican affiliate as low risk.  The result was that HSBC’s Mexican operations moved $7bn in physical cash into the US between 2007 and 2008. Instead of prosecuting senior bankers, however, the US Department of Justice has entered into a ‘deferred prosecution agreement’ with the bank, in which the bank is essentially granted immunity from prosecution in exchange for doing what they should have been doing all along.  “If you get caught with your hand in the till you go to jail, but if you’re a big bank and you’re caught breaking the law, it seems that all that happens is you’re fined and told you’ll go to jail if you do it again,” said Sharpe.

Yesterday the UK’s Home Affairs Select Committee said that fines against banks that aided money laundering and drugs trafficking were not enough. The Committee recommended personal, criminal liability for those who hold the most senior positions in banks that are found to have been involved in money laundering.

As well as prosecuting senior HSBC bankers, bonuses should be clawed back.  Lord Green was appointed HSBC chief executive in 2003 and chairman in 2006, and is now the UK Trade Minister.  “We estimate that Lord Green pocketed more than £25 million in bonuses and shares during his time at HSBC, despite the fact that the bank’s own criteria for awarding bonuses is meant to take into account adherence to ethical standards; he should return this money,” said Sharpe.

HSBC accepted responsibility for its past mistakes and stated that it had comprehensively changed its approach to anti-money laundering compliance. The bank will be monitored by the Department of Justice for the five year term of the agreement.

/Ends

For comment, please contact:/strong>

• Rosie Sharpe in London on 020 7492 5854, 07803 733781 or rsharpe@globalwitness.org
• Robert Palmer in London on 020 7492 5860, 07545 645 406 or rpalmer@globalwitness.org

Notes to editors

HSBC issued a press release stating that it had reached a Deferred Prosecution Agreement with the Department of Justice, as part of which it would pay $1.9 billion. HSBC also announced that it had reached a global deal with the relevant US regulators (New York County District Attorney’s Office, Federal Reserve, U.S. Department of the Treasury’s Office of Foreign Assets Control, Office of the Comptroller of the Currency and the Financial Crimes Enforcement Network). It expects to reach a deal with the UK Financial Services Authority shortly.

2. The Home Affairs Select Committee findings on money laundering were part of its broader investigation into drugs policy. Home Affairs Select Committee, ‘9th Report – Drugs: Breaking the Cycle’, para 152.

3. Figures on Lord Green’s pay are from HSBC Holdings plc’s annual reports.  The value of the shares is listed as ‘face value’ which could be higher than expected value.