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Editor’s Comment: As the foreclosure story unfolds and the amount of money taken from the investor pools by the investment banks becomes quantified, the question becomes “where did they put all that money?” This Senate inquiry, while focused on laundering money for terrorists and countries that sponsor terrorism, will show the path that was used to distribute the “off balance sheet” transactions and “trading profits” off shore. Just ask Romney — he’ll show you how to do it.
HSBC Holdings PLC is under investigation by a Senate panel in a money-laundering inquiry, the latest step in a long-running U.S. effort to halt shadowy money flows through global banks, according to people familiar with the situation and a company securities filing.
The inquiry being conducted by the Senate Permanent Subcommittee on Investigations could yield a report and congressional hearing later this spring, these people said. The subcommittee has a history of conducting high-profile hearings that have proved embarrassing for the world’s biggest banks.
The intensifying scrutiny of HSBC is the latest in a series if investigations by U.S. officials into how global banks have processed — and in some cases, intentionally hidden — financial transactions on behalf of countries which allegedly support terrorism, corrupt foreign officials, drug gangs and criminals. Since 2008, European and U.S. banks have signed deferred prosecution agreements and paid more than $1.2 billion in penalties for alleged violations of anti-money laundering regulations.
The specific focus of the Senate probe of HSBC isn’t known. A Reuters review of legal documents and prior regulatory probes, though, points to a number of alleged breakdowns in HSBC’s anti-money laundering systems.
HSBC spokesman Robert Sherman said in a statement, “We have ongoing discussions with officials” including the Senate panel “on a number of regulatory and compliance matters. The nature of these discussions is confidential; in all cases, we are cooperating.”
A spokesperson for the Senate subcommittee declined comment.
Earlier this month, HSBC named former top U.S. Treasury Department official Stuart Levey as chief legal officer in a sign of how the bank is hiring outside experts in money laundering. Levey, who specialized in combating terrorism financing and left the Treasury Department last year, is based in London. An HSBC spokesman said Levey wasn’t available for comment.
Stuart Gulliver, HSBC chief executive, said in a statement this month that Levey’s experience “dealing with international financial and legal issues is highly relevant to a global bank such as HSBC.”
EARLY WARNING SIGNS
For HSBC, which has operations in more than 80 countries and territories, the Senate probe is another sign that U.S. law enforcement officials are widening their inquiries into the London bank – one that for the past decade has repeatedly drawn scrutiny from U.S. financial regulators for weak money-laundering controls and allegedly enabling healthcare fraud and tax evasion.
In 2003 and 2010, two U.S. bank regulators raised serious concerns about the bank’s anti-money laundering systems and staff and ordered the bank to improve anti-money laundering systems and personnel, according to enforcement actions by the Federal Reserve Bank of New York and the Comptroller of the Currency, a Treasury Department unit.
In securities filings, the bank has disclosed increasing inquiries. In 2010, the bank disclosed that it had received grand jury subpoenas and was being investigated by the Justice Department in money-laundering inquiries. It subsequently said the district attorney’s office in Manhattan was investigating.
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