Financial Transparency Coalition

HSBC Bank USA N.A. and HSBC Bank Holdings plc, its parent company, agreed to forfeiture and penalties of a little more than $1.9 billion dollars for systemic and willful violations of U.S. anti-money laundering and foreign sanctions laws. $1.9 billion may sounds like a lot, but does the penalty fit the crime?

We are going to present you a series of excerpts from the Statement of Facts, which constitutes Attachment A to the Deferred Prosecution Agreement entered into between U.S. regulators and the HSBC banks, and let you decide for yourself. These are excerpts detailing events that HSBC explicitly has admitted to.

Excerpt 1: Just how much money are we really talking about?

The press has been reporting that HSBC USA allowed $670 billion in wire transfers from Mexico through the bank without legally required money laundering controls, $881 million of which has been directly linked to money laundered by Mexican and Columbian drug cartels.  These reports understate the problem by a few hundred trillion dollars:

Paragraph 10 of the Statement of Facts:

10. There were at least four significant failures in HSBC Bank USA’s AML program that allowed the laundering of drug trafficking proceeds through HSBC Bank USA:

• a. Failure to obtain or maintain due diligence or KYC information on HSBC Group Affiliates, including HSBC Mexico;
• b. Failure to adequately monitor over $200 trillion in wire transfers between 2006 and 2009 from customers located in countries that HSBC Bank USA classified as
• “standard” or “medium” risk, including over $670 billion in wire transfers from HSBC Mexico;
• c. Failure to adequately monitor billions of dollars in purchases of physical U.S. dollars (“banknotes”) between July 2006 and July 2009 from HSBC Group Affiliates, including over $9.4 billion from HSBC Mexico; and d. Failure to provide adequate staffing and other resources to maintain an effective AML program.

You can read the whole Statement of Facts here. We will be bringing you many more excerpts from it over the next few weeks.

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